Purchasing power parity and the long memory properties of real exchange rates: does one size fit all?

Marcel Aloy, Mohamed Boutahar, Karine Gente () and Anne Peguin-Feissolle ()
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Anne Peguin-Feissolle: GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper examines the time series behavior of monthly bilateral real exchange rates (RER) on a comprehensive sample of 78 industrialized and developing countries, using the U.S. Dollar, the UK Pound and the German Deutsche Mark as numeraires. We suggest a three-step testing procedure based on recently introduced econometric techniques, in order to assess the mean-reverting properties of the RER and to address the question of whether real exchange rates follow a non linear process or a long memory process. The main results are as follows. Firstly, most of the bilateral real exchange rates under study are not mean-reverting. Secondly, the nonlinear ESTAR type adjustment is far from being prominent. Finally, only few bilateral RER exhibit true long memory mean-reverting properties.

Keywords: Fractional Integration; Nonlinear modelling; Mean reverting process; Long-memory process (search for similar items in EconPapers)
Date: 2011-01-25
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00559170
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Citations: View citations in EconPapers (12)

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Journal Article: Purchasing power parity and the long memory properties of real exchange rates: Does one size fit all? (2011)
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