The behavior of real exchange rate: Nonlinearity and breaks

Chia-Hao Lee () and Pei-I Chou

International Review of Economics & Finance, 2013, vol. 27, issue C, 125-133

Abstract: We analyze the possibility of nonlinear adjustment and unknown smooth breaks in the stationarity of real exchange rates in the Group of 20 (G-20) countries over a period from January 1994 to April 2010 by applying the Panel SURADF test with Fourier function. Although most of the results from a univariate unit root test and panel unit root test indicated a fail to reject the unit root null hypothesis in the real exchange rates of G-20, the results of the Panel SURADF test with Fourier function show a strong rejection of non-stationarity of real exchange rates among the G-20 and imply that PPP is valid for all in the G-20. The evidence also implies that there are nonlinearity and smooth breaks in real exchange rates of G-20 countries.

Keywords: Real exchange rates; Purchasing power parity; Panel SURADF test with Fourier function; G-20 countries (search for similar items in EconPapers)
JEL-codes: C23 F31 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:27:y:2013:i:c:p:125-133

DOI: 10.1016/j.iref.2012.09.007

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