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Nonlinearities in real exchange rate determination: do African exchange rates follow a radom walk?

Juan Cuestas and Estefanía Mourelle

NBS Discussion Papers in Economics from Economics, Nottingham Business School, Nottingham Trent University

Abstract: In this paper we aim at modelling the long run behaviour of the Real Effective Exchange Rates (REER) for a pool of African countries. Not much attention has been paid to this group of countries, in particular, to the existence of nonlinearities in the long run path of such a variable. Controlling for two sources of nonlinearites, i.e. asymmetric adjustment to equilibrium and nonlinear deterministic trends allows us to gain some insight about the behaviour of the African REER. We find that these sources of nonlinearites help us to explain the apparent unit root behaviour found applying linear unit root tests for most of the countries.

Keywords: PPP; Real Exchange Rates; Unit roots; Nonlinearities. (search for similar items in EconPapers)
JEL-codes: C32 F15 (search for similar items in EconPapers)
Date: 2008-07
New Economics Papers: this item is included in nep-afr, nep-cba, nep-fmk and nep-ifn
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http://www.ntu.ac.uk/__data/assets/pdf_file/0019/3 ... te-determination.pdf First version, 2008 (application/pdf)

Related works:
Journal Article: Nonlinearities in real exchange rate determination: do African exchange rates follow a random walk? (2011) Downloads
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