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Structural Breaks in Volatility: Evidence for the OECD Real Exchange Rates

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Abstract

This paper analyses whether volatility changes in the bilateral and effective real exchange rates of the OECD industrial countries are associated with a specific nominal exchange rate regime. To that end, we examine the real exchange rate behaviour during the 1960-2003 period, therefore covering both the Bretton Woods system of fixed exchange rates and adoption of generalised floating exchange rates from 1973. We make use of an econometric methodology based on the Hansen (1997)'s approximation to the p-values of the supreme, exponential and average statistics developed by Andrews (1993) and Andrews and Ploberger (1994). This methodology allows us to obtain a profile of p-values and to delimit periods of stability and instability in the variance of real exchange rates. Results suggest that there is evidence in favour of the non-neutrality of nominal exchange rate regime regarding real exchange rate volatility.

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  • Amalia Morales Zumaquero & Simón Sosvilla Rivero, 2005. "Structural Breaks in Volatility: Evidence for the OECD Real Exchange Rates," Economic Working Papers at Centro de Estudios Andaluces E2005/01, Centro de Estudios Andaluces.
  • Handle: RePEc:cea:doctra:e2005_01
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    6. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
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    Cited by:

    1. Ana Carolina Ortega Masagué, "undated". "La situación laboral de los inmigrantes en España: Un análisis descriptivo," Working Papers 2005-08, FEDEA.
    2. Corinne Mette, "undated". "Wellbeing and dependency among European elderly: The role of social integration," Working Papers 2005-12, FEDEA.
    3. Namkee Ahn & Juan Ramón García & José A. Herce, "undated". "Demographic Uncertainty and Health Care Expenditure in Spain," Working Papers 2005-07, FEDEA.
    4. Simon Sosvilla-Rivero & Pedro Rodriguez, 2010. "Linkages in international stock markets: evidence from a classification procedure," Applied Economics, Taylor & Francis Journals, vol. 42(16), pages 2081-2089.

    More about this item

    Keywords

    Exchange rate regimes; real exchange rate; volatility;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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