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Nonlinearities or outliers in real exchange rates?

Author

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  • Antonia López Villavicencio

    (UAB - Universitat Autònoma de Barcelona = Autonomous University of Barcelona = Universidad Autónoma de Barcelona)

Abstract

Long-lasting misalignments in the real exchange rates are sometimes explained by the presence of a nonlinear adjustment process towards the long-run equilibrium. However, while it is possible that evidence of nonlinearity exists for some real exchange rates, outliers and nonlinearity may easily be confused. This paper uses robust methods to examine and compare the behaviour of Smooth Transition Autoregressive [STAR] models for the real exchange rates of 14 countries. The results show that the evidence for nonlinearity is reduced when considering outliers. Nonlinearity is also more common among developing economies.

Suggested Citation

  • Antonia López Villavicencio, 2008. "Nonlinearities or outliers in real exchange rates?," Post-Print hal-05455662, HAL.
    • Handle: RePEc:hal:journl:hal-05455662
    DOI: 10.1016/j.econmod.2007.11.001
    Note: View the original document on HAL open archive server: https://hal.science/hal-05455662v1
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    References listed on IDEAS

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    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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