 The Long Swings Puzzle: What the Data Tell When Allowed to Speak FreelyChapter 8 in Palgrave Handbook of Econometrics, 2009, pp 349-384 from Palgrave Macmillan Abstract: Abstract The persistent movements away from long-run benchmark values in real exchange rates that are often observed in many real exchange rates during periods of currency float have been subject to much empirical and theoretical research without resolving the underlying puzzle. This chapter demonstrates how the cointegrated VAR approach of grouping together components of similar persistence can be used to uncover structures in the data that ultimately may help to explain theoretically the forces underlying such puzzling movements. The characterization of the data into components which are empirically I(0), I(1) and I(2) is shown to be a powerful organizing principle, allowing us to structure the data into long-run, medium-run, and short-run behavior. Its main advantage is the ability to associate persistent movements away from fundamental benchmark values in one variable/relation with similar persistent movements somewhere else in the economy. Keywords: Exchange Rate; Unit Root; Real Exchange Rate; Relative Prex; Nominal Exchange Rate (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-24440-5_8 Ordering information: This item can be ordered from Access Statistics for this chapter More chapters in Palgrave Macmillan Books from Palgrave Macmillan |
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