Dornsbush revisited from an asymmetrical perspective: Evidence from G20 nominal effective exchange rates

Frédérique Bec and Mélika Ben Salem ()
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Mélika Ben Salem: Université de Cergy-Pontoise, THEMA

No 2019-12, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: This paper develops an asymmetrical overshooting correction autoregressive model to capture excessive nominal exchange rate variation. It is based on the widely accepted perception that open economies might prefer under-evaluation to over-evaluation of their currency so as to foster their net exports. Our approach departs from existing works by allowing the strength of the overshooting correction mechanism to di er between over-depreciations and over-appreciations. It turns out that most of monthly e ective exchange rates for the G20 countries are in fact well characterized by an overshooting correction after an over-appreciation only.

Keywords: nominal exchange rate; asymmetrical overshooting correction. (search for similar items in EconPapers)
JEL-codes: C22 F31 F41 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-mon and nep-opm
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Related works:
Working Paper: Dornsbush revisited from an asymmetrical perspective: Evidence from G20 nominal effective exchange rates (2019)
Working Paper: Dornsbush revisited from an asymmetrical perspective: Evidence from G20 nominal effective exchange rates (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2019-12

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