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Nonlinearities in real exchange rate determination: do African exchange rates follow a radom walk?

  • Juan Carlos Cuestas
  • Estefania Mourelle

In this paper we aim at modelling the long run behaviour of the Real Effective Exchange Rates (REER) for a pool of African countries. Not much attention has been paid to this group of countries, in particular, to the existence of nonlinearities in the long run path of such a variable. Controlling for two sources of nonlinearites, i.e. asymmetric adjustment to equilibrium and nonlinear deterministic trends allows us to gain some insight about the behaviour of the African REER. We find that these sources of nonlinearites help us to explain the apparent unit root behaviour found applying linear unit root tests for most of the countries.

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File URL: http://www.ntu.ac.uk/research/document_uploads/85418.pdf
File Function: First version, 2008
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Paper provided by Nottingham Trent University, Nottingham Business School, Economics Division in its series Working Papers with number 2008/8.

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Date of creation: Jul 2008
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Handle: RePEc:nbs:wpaper:2008/8
Contact details of provider: Web page: http://www.ntu.ac.uk/nbs

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  26. repec:ebl:ecbull:v:6:y:2006:i:17:p:1-15 is not listed on IDEAS
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