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Persistent misalignments of the European exchange rates: some evidence from non-linear cointegration

Author

Listed:
  • Gilles Dufrénot

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Laurent Mathieu

    (C3ED - Centre d'économie et d'éthique pour l'environnement et le développement - UVSQ - Université de Versailles Saint-Quentin-en-Yvelines)

  • Valérie Mignon

    (CEPII - Centre d'études prospectives et d'informations internationales, EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Anne Peguin-Feissolle

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

The asymmetric and persistent adjustment of the European real exchange rates is investigated using the framework of non-linear cointegration. The episodes of slow mean-reversion dynamics over the period from 1979 to 1999 are explained. A test of unit root against STAR cointegration is proposed and some complete estimations and stochastic simulations of ESTAR models are presented. The presence of effective non-linear adjustment during the moving of the currencies to their long-run fundamental equilibrium exchange rate value is discussed.

Suggested Citation

  • Gilles Dufrénot & Laurent Mathieu & Valérie Mignon & Anne Peguin-Feissolle, 2006. "Persistent misalignments of the European exchange rates: some evidence from non-linear cointegration," Post-Print halshs-00256876, HAL.
    • Handle: RePEc:hal:journl:halshs-00256876
    DOI: 10.1080/00036840500390262
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    Citations

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    Cited by:

    1. McMillan, David G., 2009. "The confusing time-series behaviour of real exchange rates: Are asymmetries important?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(4), pages 692-711, October.
    2. Kiliç, Rehim, 2009. "Further on nonlinearity, persistence, and integration properties of real exchange rates," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(2), pages 207-221, April.
    3. Zied Ftiti & Slim Chaouachi, 2018. "What Can We Learn About the Real Exchange Rate Behavior in the Case of a Peripheral Country?," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(3), pages 681-707, September.
    4. Grote, Claudia & Sibbertsen, Philipp, 2013. "Testing for Cointegration in a Double-LSTR Framework," Hannover Economic Papers (HEP) dp-514, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    5. Aloy, Marcel & Boutahar, Mohamed & Gente, Karine & Péguin-Feissolle, Anne, 2011. "Purchasing power parity and the long memory properties of real exchange rates: Does one size fit all?," Economic Modelling, Elsevier, vol. 28(3), pages 1279-1290, May.
    6. Caporale, Guglielmo Maria & Gil-Alana, Luis A., 2013. "Long memory and fractional integration in high frequency data on the US dollar/British pound spot exchange rate," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 1-9.
    7. Béreau, Sophie & Villavicencio, Antonia López & Mignon, Valérie, 2010. "Nonlinear adjustment of the real exchange rate towards its equilibrium value: A panel smooth transition error correction modelling," Economic Modelling, Elsevier, vol. 27(1), pages 404-416, January.
    8. Dufrénot, Gilles & Lardic, Sandrine & Mathieu, Laurent & Mignon, Valérie & Péguin-Feissolle, Anne, 2008. "Explaining the European exchange rates deviations: Long memory or non-linear adjustment?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(3), pages 207-215, July.
    9. Marçal, Emerson Fernandes, 2014. "Desalinhamentos Cambiais, Interdependência, Crises, Guerras cambiais: Uma avaliação empírica," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 68(2), June.
    10. Antonia López-Villavicencio & Valérie Mignon, 2009. "On Equilibrium Exchange Rates: Is Emerging Asia Different?," Working Papers 2009-38, CEPII research center.
    11. Kelly, Arsene Mouongue & Ndeffo, Luc Nembot, 2025. "Aid or sanction? Comparing the effectiveness of climate finance and environmental taxation in mitigating environmental degradation in Africa," Innovation and Green Development, Elsevier, vol. 4(3).
    12. Megumi Kubota, "undated". "Real Exchange Rate Misalignments: Theoretical Modelling and Empirical Evidence," Discussion Papers 09/24, Department of Economics, University of York.
    13. Liew, Venus Khim-Sen, 2008. "An overview on various ways of bootstrap methods," MPRA Paper 7163, University Library of Munich, Germany.
    14. Yung-Shi Liau & Jack Yang, 2008. "The mean/volatility asymmetry in Asian stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 18(5), pages 411-419.
    15. Joanna Bruzda & Tomasz, Koźliński, 2005. "Non-linearity and the Purchasing Power Parity Hypothesis for Exchange Rate JPY/USD," FindEcon Chapters: Forecasting Financial Markets and Economic Decision-Making, in: Władysław Milo & Piotr Wdowiński (ed.), Acta Universitatis Lodziensis. Folia Oeconomica nr 192/2005 - Issues in Modeling, Forecasting and Decision-Making in Financial Markets, edition 1, volume 127, chapter 11, pages 177-193, University of Lodz.
    16. Slim Chaouachi & Zied Ftiti & Frederic Teulon, 2014. "Explaining the Tunisian Real Exchange: Long Memory versus Structural Breaks," Working Papers 2014-147, Department of Research, Ipag Business School.
    17. Marçal, Emerson Fernandes, 2013. "Exchange rate misalignments, interdependence, crises, and currency wars: an empirical assessment," Textos para discussão 348, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    18. Ahmad Zubaidi Baharumshah & Venus Khim-Sen Liew & Ron Mittelhammer, 2010. "Non-linearities in Real Interest Rate Parity: Evidence from OECD and Asian Developing Economies," Global Economic Review, Taylor & Francis Journals, vol. 39(4), pages 351-364.
    19. López Villavicencio, Antonia, 2008. "Nonlinearities or outliers in real exchange rates?," Economic Modelling, Elsevier, vol. 25(4), pages 714-730, July.
    20. repec:fgv:epgrbe:v:68:n:2:a:5 is not listed on IDEAS
    21. repec:ipg:wpaper:2014-390 is not listed on IDEAS
    22. Carlos Barros & Guglielmo Maria Caporale & Luis Gil-Alana, 2014. "Long Memory in Angolan Macroeconomic Series: Mean Reversion versus Explosive Behaviour," African Development Review, African Development Bank, vol. 26(1), pages 59-73.

    More about this item

    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F49 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Other

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