An Analysis of Real Exchange Rate Misalignments under Regime Shifts in Argentina

J. Daniel Aromi and Marcos Dal Bianco

Ensayos Económicos, 2014, vol. 1, issue 71, 40-71

Abstract: We analyzed the presence of different mean and variance regimens for the misalignment of the real exchange rate of Argentina using a switching regimen Markov model with time-varying transition probabilities. Our estimates identified two states in the mean of the real exchange rate misalignment associated with real appreciations and depreciations, being the latter more persistent than the former. On the other hand, we only found one state for the variance of those imbalances. Besides, a close temporal correlation between the mayor stabilization plans and the appreciated state is verified. Finally, we showed that using time-varying transition probabilities is proper approach, being those probabilities explained by domestic variables, like the inflation rate, and international variables, like the US interest rate.

Keywords: Argentina; real exchange rate; real imbalances; regime switching models (search for similar items in EconPapers)
JEL-codes: C11 C22 F31 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:bcr:ensayo:v:1:y:2014:i:71:p:40-71

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