Real exchange rates and real interest rates: a nonlinear perspective

Frédérique Bec, Mélika Ben Salem and Ronald MacDonald ()

Recherches économiques de Louvain, 2006, vol. 72, issue 2, pages 177-194

Abstract: In this paper we use a Threshold AutoRegressive (TAR) model to capture the nonlinear dynamics of monthly real effective exchange rate data for the G7 countries. The novelty of our approach relates to the use of the real interest differential as the switching variable. This choice allows us to consider jointly the nonlinearity and nonstationarity issues using recent advances in asymptotic theory. We find that the null of linearity is easily rejected against the nonlinear model for all currencies considered. Further, for five out of the seven countries, where the null of unit root is rejected, we report evidence of quite rapid mean reversion.

Date: 2006
View citations in EconPapers

Downloads: (external link)
http://www.cairn.info/load_pdf.php?ID_ARTICLE=REL_722_0177 (application/pdf)
http://www.cairn.info/revue-recherches-economiques ... -2006-2-page-177.htm (text/html)
restricted

Related works:
Working Paper: Real exchange rates and real interest rates: a nonlinear perspective (2006)
Working Paper: Real exchange rates and real interest rates: A nonlinear perspective (1999)
Working Paper: Real Exchange Rates and Real Interest Rates: a nonlinear Perspective (1999)
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: http://EconPapers.repec.org/RePEc:cai:reldbu:rel_722_0177

Access Statistics for this article

More articles in Recherches économiques de Louvain from De Boeck Université
Series data maintained by Jean-Baptiste de Vathaire ().