Nonlinear Adjustment of the Real Exchange Rate Towards its Equilibrium Value: a Panel Smooth Transition Error Correction Modelling

Sophie Béreau (), Antonia López Villavicencio and Valérie Mignon ()

Working Papers from CEPII research center

Abstract: We study the nonlinear dynamics of the real exchange rate towards its behavioral equilibrium value (BEER) using a Panel Smooth Transition Regression model framework.We show that the real exchange rate convergence process in the long run is characterized by nonlinearities for emerging economies, whereas industrialized countries exhibit a linear pattern. Moreover, there exists an asymmetric behavior of the real exchange rate when facing an over- or an undervaluation of the domestic currency. Finally, our results suggest that the real exchange rate is unable to unwind alone global imbalances.

Keywords: Equilibrium exchange rate; BEER model; Panel smooth transition regression; Panel vector error correction model (search for similar items in EconPapers)
JEL-codes: C23 F31 (search for similar items in EconPapers)
Date: 2008-10
New Economics Papers: this item is included in nep-cba, nep-ets, nep-ifn and nep-opm
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Citations: View citations in EconPapers (9)

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Journal Article: Nonlinear adjustment of the real exchange rate towards its equilibrium value: A panel smooth transition error correction modelling (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepidt:2008-23

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