Real Exchange Rate Volatility: Does the Nominal Exchange Rate Regime Matter?

Hong Liang

No 1998/147, IMF Working Papers from International Monetary Fund

Abstract: A recent study by Grilli and Kaminsky (1991) argues that real exchange rate (RER) behavior is likely to be dependent on the particular historical period rather than on the nominal exchange rate arrangement itself. This paper reexamines RER behavior using alternative data sets, as well as different econometric methods, over the period 1880-1997. It finds strong evidence supporting the nonneutrality hypothesis of nominal exchange regime on RER volatility. Also, regime shifts play an important role in determining the persistence of shocks to the RER.

Keywords: WP; U.S. dollar; deutsche mark; floating exchange rate; null hypothesis; rate of change; Exchange rate regimes; real exchange rate; volatility; exchange rate regime; RER series; RER volatility; exchange regime; Exchange rate arrangements; Real exchange rates; Exchange rates; Exchange rate analysis; Exchange rate flexibility; Europe (search for similar items in EconPapers)
Pages: 38
Date: 1998-10-01
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Citations: View citations in EconPapers (15)

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