Nonparametric cointegration analysis of real exchange rates

Jerry Coakley and Ana-Maria Fuertes

Applied Financial Economics, 2001, vol. 11, issue 1, 1-8

Abstract: This study indirectly addresses the issue of potential nonlinearities in real exchange rate adjustment for 18 OECD economies 1973-1998 using recent developments in the theory of nonparametric cointegration. While the standard Johansen tests yield mixed evidence, the results from a new nonparametric approach are clearly supportive of real exchange rate stationarity. Since the latter approach allows for a relatively general data-generating process, the findings are consistent with nonlinear mean reversion.

Date: 2001
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DOI: 10.1080/09603100150210200

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