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Long-Run Exchange Rate Dynamics: A Panel Data Study

Author

Listed:
  • Mr. Karl F Habermeier
  • Mr. Mario M Mesquita

Abstract

Long-run movements of real exchange rates are studied using a panel data set comprising 51 economies. The purchasing power parity hypothesis (PPP) is examined first using unit root tests. It is found that PPP does not hold for the full sample of countries, but it may hold for the advanced economies, as well as open and high-inflation economies. Using the recently developed mean group and pooled mean group estimators, the paper finds support for the Balassa-Samuelson hypothesis in both advanced and developing economies; and for the influence of shifts in the terms of trade.

Suggested Citation

  • Mr. Karl F Habermeier & Mr. Mario M Mesquita, 1999. "Long-Run Exchange Rate Dynamics: A Panel Data Study," IMF Working Papers 1999/050, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:1999/050
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=2984
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    Citations

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    Cited by:

    1. Mr. Rupert D Worrell & Harold Codrington & Kevin Greenidge & Roland Craigwell, 2003. "Economic Resilience with An Exchange Rate Peg: The Barbados Experience, 1985-2000," IMF Working Papers 2003/168, International Monetary Fund.
    2. Gour Gobinda Goswami & Sadaquat Junayed, 2006. "Pooled Mean Group Estimation of the Bilateral Trade Balance Equation: USA vis-a-vis her Trading Partners," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(4), pages 515-526.
    3. Dungey, Mardi, 2004. "Identifying terms of trade effects in real exchange rate movements: evidence from Asia," Journal of Asian Economics, Elsevier, vol. 15(2), pages 217-235, April.
    4. Jakub Borowski & Michal Brzoza-Brzezina, 2004. "Designing Poland's Macroeconomic Strategy on the Way to the Euro Area," EUI-RSCAS Working Papers 10, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    5. Clements, Kenneth & Lan, Yihui & Roberts, John, 2008. "Exchange-rate economics for the resources sector," Resources Policy, Elsevier, vol. 33(2), pages 102-117, June.
    6. Sascha Keil, 2021. "The Challenging Estimation Of Trade Elasticities:Tackling The Inconclusive Eurozone Evidence," Chemnitz Economic Papers 042, Department of Economics, Chemnitz University of Technology, revised May 2021.

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