Nonlinear adjustment of the real exchange rate towards its equilibrium value: A panel smooth transition error correction modelling

Sophie Béreau (), Antonia López Villavicencio and Valérie Mignon ()

Economic Modelling, 2010, vol. 27, issue 1, 404-416

Abstract: We study the nonlinear dynamics of the real exchange rate towards its behavioral equilibrium value (BEER) using a Panel Smooth Transition Regression model framework. We show that the real exchange rate convergence process in the long-run is characterized by nonlinearities for emerging economies, whereas industrialized countries exhibit a linear pattern. Moreover, there exists an asymmetric behavior of the real exchange rate when facing an over- or an undervaluation of the domestic currency. Finally, our results suggest that the real exchange rate may be unable to unwind alone global imbalances.

Keywords: Equilibrium; exchange; rate; BEER; model; Panel; smooth; transition; regression; Panel; vector; error; correction; model (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

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Related works:
Working Paper: Nonlinear Adjustment of the Real Exchange Rate Towards its Equilibrium Value: a Panel Smooth Transition Error Correction Modelling (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:27:y:2010:i:1:p:404-416

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