Identifying Permanent and Transitory Components in Latin-American Real Exchange Rates

Indira Romero and Gabriel Rodríguez
Additional contact information
Indira Romero: Department of Economics, University of Ottawa

No 0308E, Working Papers from University of Ottawa, Department of Economics

Abstract: The behaviour of the long-run real exchange rate for four Latin-American countries is investigated for the period 1957-2002. The long-run real exchange rate is derived from an unobserved component model which divides the real exchange rate into a permanent and a transitory component. The permanent component is modeled as a homoskedastic randomwalk while the transitory component is modeled as having variances which switch according to a Markov-Switching process, between low and high variance states. Following Engel and Kim (1999), we estimate this model using the Gibbssampling methodology with monthly data for Argentina, Brazil, Chile and Mexico. The analysis of results allows us to estimate diferent expected duration of the low and high-variance regimes; as well as the behavior of the permanent and transitory components and the detection of important events in the four countries related to the peaks of the high-variance state.

Keywords: Real Exchange Rates; Gibbs-Sampling; Permanent and Transitory Components; Low and High variance Regimes. (search for similar items in EconPapers)
JEL-codes: C2 C5 F3 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://sciencessociales.uottawa.ca/economics/sites ... mics/files/0308E.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 502 Bad Gateway (http://sciencessociales.uottawa.ca/economics/sites/socialsciences.uottawa.ca.economics/files/0308E.pdf [301 Moved Permanently]--> https://sciencessociales.uottawa.ca/economics/sites/socialsciences.uottawa.ca.economics/files/0308E.pdf)

Related works:
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:ott:wpaper:0308e

Access Statistics for this paper

More papers in Working Papers from University of Ottawa, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Aggey Semenov ().