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Persistent misalignments of the European exchange rates : some evidence from nonlinear cointegration

  • G. Dufrenot
  • L. Mathieu
  • V. Mignon,
  • A. Peguin-Feissolle

This paper investigates the asymmetric and persistent adjustment of the European real exchange rates using the framework of nonlinear cointegration. We explain the episodes of slow mean- reversion dynamics over the period from 1979 to 1999. A test of unit root against STAR cointegration is proposed and we present some complete estimations and Stochastic simulations of ESTAR models. We conclude to the presence of effective nonlinear adjustment during the moving of the currencies to their long-run fundamental equilibrium exchange rate value.

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Paper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2002-29.

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Date of creation: 2002
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Handle: RePEc:ema:worpap:2002-29
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