Structural Breaks in Volatility: Evidence for the OECD Real Exchange Rates

Amalia Morales Zumaquero () and Simon Sosvilla-Rivero ()
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Amalia Morales Zumaquero: Universidad de Málaga, http://www.uma.es/

No E2005/01, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: This paper analyses whether volatility changes in the bilateral and effective real exchange rates of the OECD industrial countries are associated with a specific nominal exchange rate regime. To that end, we examine the real exchange rate behaviour during the 1960-2003 period, therefore covering both the Bretton Woods system of fixed exchange rates and adoption of generalised floating exchange rates from 1973. We make use of an econometric methodology based on the Hansen (1997)'s approximation to the p-values of the supreme, exponential and average statistics developed by Andrews (1993) and Andrews and Ploberger (1994). This methodology allows us to obtain a profile of p-values and to delimit periods of stability and instability in the variance of real exchange rates. Results suggest that there is evidence in favour of the non-neutrality of nominal exchange rate regime regarding real exchange rate volatility.

Keywords: Exchange rate regimes; real exchange rate; volatility (search for similar items in EconPapers)
JEL-codes: F31 F33 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets, nep-fin, nep-ifn and nep-pbe
Date: 2005
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Working Paper: Structural Breaks in Volatility: Evidence from the OECD Real Exchange Rates
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Persistent link: http://EconPapers.repec.org/RePEc:cea:doctra:e2005_01

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