Debt Thresholds and Real Exchange Rates: An Emerging Markets Perspective

Vahagn Galstyan and Adnan Velic

Economic Papers from Trinity College Dublin, Economics Department

Abstract: In this paper we empirically analyze nonlinearities in short-run real exchange rate dynamics. Our findings suggest that real exchange rate misalignments are considerably less persistent and more volatile during times of high debt. Assessing the variance of changes in misalignments, we retrieve evidence indicating that the nominal exchange rate and inflation differentials are more important determinants in states of high debt than in states of low debt. Overall, our results imply that nonlinearities have non-negligible implications for the mechanics of real exchange rate adjustment in emerging markets.

Pages: 38 pages
Date: 2016-03
New Economics Papers: this item is included in nep-cba and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.tcd.ie/Economics/TEP/2016/TEP0416.pdf

Related works:
Journal Article: Debt thresholds and real exchange rates: An emerging markets perspective (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep0416

Access Statistics for this paper

More papers in Economic Papers from Trinity College Dublin, Economics Department Contact information at EDIRC.
Bibliographic data for series maintained by Colette Angelov ().