IDEAS home Printed from https://ideas.repec.org/p/fda/fdaddt/2004-22.html
   My bibliography  Save this paper

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

Author

Listed:
  • Amalia Morales-Zumaquero
  • Simon Sosvilla-Rivero

Abstract

This paper analyses whether volatility changes in the real exchange rates (RERs) of the OECD industrial countries are associated with a specific nominal exchange rate regime. To that end, we examine RER behaviour during the period 1960-2003, thereby covering both the Bretton Woods system of fixed exchange rates and the adoption of generalised floating exchange rates from 1973. We make use of an econometric methodology based on Hansen’s (1997) 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. For most countries in our sample, there is evidence in favour of the non-neutrality of the nominal exchange rate regime regarding real exchange rate volatility.

Suggested Citation

  • Amalia Morales-Zumaquero & Simon Sosvilla-Rivero, "undated". "Structural Breaks in Volatility: Evidence from the OECD Real Exchange Rates," Working Papers 2004-22, FEDEA.
    • Handle: RePEc:fda:fdaddt:2004-22
    as

    Download full text from publisher

    File URL: https://documentos.fedea.net/pubs/dt/2004/dt-2004-22.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Flood, Robert P. & Rose, Andrew K., 1995. "Fixing exchange rates A virtual quest for fundamentals," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 3-37, August.
    2. Richard N. Cooper, 1999. "Exchange rate choices," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 43(Jun), pages 99-136.
    3. Ms. Hong Liang, 1998. "Real Exchange Rate Volatility: Does the Nominal Exchange Rate Regime Matter?," IMF Working Papers 1998/147, International Monetary Fund.
    4. Jorge Carrera & Guillermo Vuletin, 2003. "The Effects of Exchange Rate Regimes on Real Exchange Rate Volatility. A Dynamic Panel Data Approach," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31st Brazilian Economics Meeting] c67, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    5. Donald W. K. Andrews, 2003. "Tests for Parameter Instability and Structural Change with Unknown Change Point: A Corrigendum," Econometrica, Econometric Society, vol. 71(1), pages 395-397, January.
    6. John H. Rogers, 1995. "Real shocks and real exchange rates in really long-term data," International Finance Discussion Papers 493, Board of Governors of the Federal Reserve System (U.S.).
    7. Frankel, Jeffrey A. & Rose, Andrew K., 1995. "Empirical research on nominal exchange rates," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 33, pages 1689-1729, Elsevier.
    8. 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.
    9. Christopher Kent & Rafic Naja, 1998. "Effective Real Exchange Rates and Irrelevant Nominal Exchange-rate Regimes," RBA Research Discussion Papers rdp9811, Reserve Bank of Australia.
    10. Mussa, Michael, 1986. "Nominal exchange rate regimes and the behavior of real exchange rates: Evidence and implications," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 117-214, January.
    11. Maximo Camacho, 2004. "Vector smooth transition regression models for US GDP and the composite index of leading indicators," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 23(3), pages 173-196.
    12. Richard N. Cooper, 1999. "Exchange Rate Choices," Harvard Institute of Economic Research Working Papers 1877, Harvard - Institute of Economic Research.
    13. Grilli, Vittorio & Kaminsky, Graciela, 1991. "Nominal exchange rate regimes and the real exchange rate : Evidence from the United States and Great Britain, 1885-1986," Journal of Monetary Economics, Elsevier, vol. 27(2), pages 191-212, April.
    14. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. 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.
    4. Namkee Ahn & Juan Ramón García & José A. Herce, "undated". "Demographic Uncertainty and Health Care Expenditure in Spain," Working Papers 2005-07, FEDEA.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Morales-Zumaquero, Amalia & Sosvilla-Rivero, Simon, 2010. "Structural breaks in volatility: Evidence for the OECD and non-OECD real exchange rates," Journal of International Money and Finance, Elsevier, vol. 29(1), pages 139-168, February.
    2. Grossmann, Axel & Love, Inessa & Orlov, Alexei G., 2014. "The dynamics of exchange rate volatility: A panel VAR approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 33(C), pages 1-27.
    3. Grossmann, Axel & Orlov, Alexei G., 2022. "Exchange rate misalignments, capital flows and volatility," The North American Journal of Economics and Finance, Elsevier, vol. 60(C).
    4. Meier, Carsten-Patrick, 1999. "Predicting real exchange rates from real interest rate differentials and net foreign asset stocks: evidence for the mark/dollar parity," Kiel Working Papers 962, Kiel Institute for the World Economy (IfW Kiel).
    5. repec:diw:diwwpp:dp746 is not listed on IDEAS
    6. Jorge Carrera & Guillermo Vuletin, 2003. "The Effects of Exchange Rate Regimes on Real Exchange Rate Volatility. A Dynamic Panel Data Approach," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31st Brazilian Economics Meeting] c67, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    7. Rossi, Barbara, 2006. "Are Exchange Rates Really Random Walks? Some Evidence Robust To Parameter Instability," Macroeconomic Dynamics, Cambridge University Press, vol. 10(1), pages 20-38, February.
    8. Balázs Égert & Amalia Morales‐Zumaquero, 2008. "Exchange Rate Regimes, Foreign Exchange Volatility, and Export Performance in Central and Eastern Europe: Just another Blur Project?," Review of Development Economics, Wiley Blackwell, vol. 12(3), pages 577-593, August.
    9. Jesús Rodríguez López & José Luis Torres Chacón, 2007. "Following the Yellow Brick Road to the Euro?: Czech Republic, Hungary, and Poland," Eastern European Economics, Taylor & Francis Journals, vol. 45(6), pages 46-79, November.
    10. A. Morales-Zumaquero & Simon Sosvilla-Rivero, 2008. "Macroeconomic instability in the European monetary system?," Applied Financial Economics, Taylor & Francis Journals, vol. 18(12), pages 965-983.
    11. Valentyna Ozimkovska, 2016. "Volatility of industrial production growth and characteristics of optimal currency areas in EU-12 countries," International Economics and Economic Policy, Springer, vol. 13(4), pages 563-591, October.
    12. Rodolfo Cermeño & María Eugenia Sanin, 2015. "Are Flexible Exchange Rate Regimes more Volatile? Panel GARCH Evidence for the G7 and Latin America," Review of Development Economics, Wiley Blackwell, vol. 19(2), pages 297-308, May.
    13. Camacho Maximo & Perez Quiros Gabriel, 2007. "Jump-and-Rest Effect of U.S. Business Cycles," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 11(4), pages 1-39, December.
    14. An, Jiyoun & Park, Bokyeong, 2016. "External adjustment and trading partners’ exchange rate regimes," Japan and the World Economy, Elsevier, vol. 37, pages 47-54.
    15. Saadet Kasman & Duygu Ayhan, 2006. "Macroeconomic Volatility under Alternative Exchange Rate Regimes in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 6(2), pages 37-58.
    16. repec:zbw:bofitp:2005_008 is not listed on IDEAS
    17. Bernard, Jean-Thomas & Idoudi, Nadhem & Khalaf, Lynda & Yelou, Clement, 2007. "Finite sample multivariate structural change tests with application to energy demand models," Journal of Econometrics, Elsevier, vol. 141(2), pages 1219-1244, December.
    18. Sun, Yanpeng & Song, Yuru & Long, Chi & Qin, Meng & Lobonţ, Oana-Ramona, 2023. "How to improve global environmental governance? Lessons learned from climate risk and climate policy uncertainty," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1666-1676.
    19. repec:diw:diwwpp:dp521 is not listed on IDEAS
    20. Candelon, Bertrand & Lieb, Lenard, 2013. "Fiscal policy in good and bad times," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2679-2694.
    21. González-Rivera, Gloria & Sun, Yingying, 2017. "Density forecast evaluation in unstable environments," International Journal of Forecasting, Elsevier, vol. 33(2), pages 416-432.
    22. Guntram B. Wolff & Alexander Schulz, 2008. "Sovereign bond market integration: the euro, trading platforms and globalisation," European Economy - Economic Papers 2008 - 2015 332, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    23. Shinhye Chang & Rangan Gupta & Stephen M. Miller, 2018. "Causality Between Per Capita Real GDP and Income Inequality in the U.S.: Evidence from a Wavelet Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 135(1), pages 269-289, January.

    More about this item

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fda:fdaddt:2004-22. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Carmen Arias (email available below). General contact details of provider: https://www.fedea.net .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.