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Author: Tim Glaus
Publisher:
ISBN:
Category :
Languages : en
Pages : 38
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Book Description
In recent years, advances in the field of unit root tests helped topartially solve the first purchasing power parity puzzle. Non-linearmean-reversion tests with real exchange rates were able to reject thenull of a unit root (indicating mean reversion) in significantly morecases than the standard linear tests. These papers suffer from twoproblems: small samples and sensitivity of numeraire currency. Thisstudy investigates the mean reversion property of real effective exchangerates, which are robust to the choice of numeraire. In a largesample of 96 countries, we show that mean reversion is present inapproximately 60 % of all countries depending on the underlying timeseriesmodel.
Author: Tim Glaus
Publisher:
ISBN:
Category :
Languages : en
Pages : 38
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Book Description
In recent years, advances in the field of unit root tests helped topartially solve the first purchasing power parity puzzle. Non-linearmean-reversion tests with real exchange rates were able to reject thenull of a unit root (indicating mean reversion) in significantly morecases than the standard linear tests. These papers suffer from twoproblems: small samples and sensitivity of numeraire currency. Thisstudy investigates the mean reversion property of real effective exchangerates, which are robust to the choice of numeraire. In a largesample of 96 countries, we show that mean reversion is present inapproximately 60 % of all countries depending on the underlying timeseriesmodel.
Author: Florian Mair
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
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Book Description
This paper investigates mean reversion properties of real effective exchange rates (REERs) using a semi-parametric quantile autoregression approach. This method accounts for non-normality and captures asymmetric and dynamic adjustments towards the REER's long run equilibrium, conditional on the size of the shock to the REER. Due to our tests' nonstandard limiting distribution, we apply a resampling procedure for robust inference. Using a sample of 29 countries over the period 1980-2017, we indeed show that the REER features non-linear mean-reverting tendencies following large shocks. The REER adjusts dynamically and asymmetrically towards its long run equilibrium, conditional on the size of the shock. We find half lives of less than one year in some cases for the most extreme quantiles. Additionally, panel regressions indicate that this behavior can be explained by portfolio flows. Large deviations in the REER from its long run mean are followed by debt portfolio flows from international investors. These flows are associated with an appreciation in the REER, conditional on the level of deviation and the shocks incurred, leading to faster mean reversion in REERs. In the most extreme quantile, the flows move the REER back towards its mean by 1.78% per month.
Author: Mr.C. John McDermott
Publisher: International Monetary Fund
ISBN: 1451846924
Category : Business & Economics
Languages : en
Pages : 32
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Book Description
The time-series properties of real exchange rates, on a number of definitions, for 22 industrial countries during 1979-95 were used to re-examine whether PPP holds. It is shown that if real exchange rates reverted to a constant mean slowly, say by five percent a month, then at standard levels of significance we should expect 11 of the 22 series examined to yield evidence of mean reversion and to reject that hypothesis of a unit root. Using models that imply a constant unconditional mean or trend-stationary productivity changes, we find that only one of the 22 real exchange rates shows evidence against unit roots. This low rate of rejection of unit roots in real exchange rates can be construed as evidence against PPP.
Author: Mark P. Taylor
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 52
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Author: Frederique Bec
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Recent studies on general equilibrium models with transaction costs show that the dynamics of the real exchange rate are necessarily nonlinear. Our contribution to the literature on nonlinear price adjustment mechanisms is threefold. First, we model the real exchange rate by a Multi-Regime Logistic Smooth Transition AutoRegression (MR-LSTAR), allowing for both ESTAR-type and SETAR-type dynamics. This choice is motivated by the fact that even the theoretical models, which predict a smooth behavior for the real exchange rate, do not rule out the possibility of a discontinuous adjustment as a limit case. Second, we propose two classes of unit-root tests against this MR-LSTAR alternative, based respectively on the likelihood and on an auxiliary model. Their asymptotic distributions are derived analytically. Third, when applied to 28 bilateral real exchange rates, our tests reject the null hypothesis of a unit root for eleven series bringing evidence in favor of the purchasing power parity.
Author: Mr.Ronald MacDonald
Publisher: International Monetary Fund
ISBN: 1451921675
Category : Business & Economics
Languages : en
Pages : 54
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Book Description
This paper presents a reduced-form model of the real exchange rate. Using multilateral cointegration methods, the model is implemented for the real effective exchange rates of the dollar, the mark, and the yen, over the period 1974-1993. In contrast to much other research using real exchange rates, there is evidence of significant and sensible long-run relationships for a simplified version as well as for the full version of the model. The estimated long-run relationships are used to produce dynamic equations, which outperform a random walk and produce sensible dynamic patterns in the context of an impulse response analysis.
Author: Yingzi Su
Publisher:
ISBN:
Category :
Languages : en
Pages : 212
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Book Description
Author: Michael Bleaney
Publisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 14
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Author: Frédérique Bec
Publisher:
ISBN:
Category :
Languages : en
Pages : 35
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Author: M. F. Bleaney
Publisher:
ISBN:
Category : Commodity exchanges
Languages : en
Pages : 30
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Book Description
