Real Exchange Rate Misalignments

Cristina Terra and Frederico Valladares
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Frederico Valladares: EPGE/FGV, Tendências Consultoria Integrada

No 2009-03, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: This paper investigates episodes of real exchange rate appreciations and depreciations for a sample of 85 countries, from 1960 to 1998. The equilibrium real exchange rate series are constructed by estimating cointegration vectors with fundamentals, and departures from it are obtained. A Markov Switching Model is used to characterize the misalignments series as stochastic autoregressive processes governed by two states corresponding to different means and variances. Three are the main findings: first, some countries present no evidence of distinct regimes for misalignment; second, for some countries, there is no RER misalignment in one the regimes; and, third, for those countries with two misalignment regimes, the appreciated regime have higher persistence than the depreciated one.

Keywords: real exchange rate misalignment; Markov switching model (search for similar items in EconPapers)
JEL-codes: F31 F37 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-ifn and nep-opm
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http://thema.u-cergy.fr/IMG/documents/2009-03.pdf (application/pdf)

Related works:
Journal Article: Real exchange rate misalignments (2010)
Working Paper: Real Exchange Rate Misalignments (2004)
Working Paper: Real exchange rate misalignments (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2009-03

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