EconPapers    
Economics at your fingertips  
 

Do Currency Regime and Developmental Stage Matter for Real Exchange Rate Volatility? A Cross-Country Analysis

Monzur Hossain

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyzes real effective exchange rate (REER) volatility of 18 countries for the post-Bretton Woods period (1973-2004) under the Markov chain model framework. The findings can be summarized as follows: (i) flexible regimes induce higher short-term volatility; (ii) neither currency regime nor developmental stage is found to induce long-term real volatility; and (iii) flexible regimes and lower level of development can help adjust to long-term real shocks. Further investigation suggests that less developed economies adjust to long-term real shocks by deviating from their de jure exchange rate regime. Moreover, estimated steady state probability suggests that REER exhibits more stability in the long run, and it takes around 20 months to converge to equilibrium. In other words, this finding provides an explanation to purchasing power parity (PPP) in relative terms.

Keywords: Currency regime; Developmental stage; Real exchange rate volatility (search for similar items in EconPapers)
JEL-codes: F33 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/24868/1/MPRA_paper_24868.pdf original version (application/pdf)

Related works:
Journal Article: Do Currency Regime and Developmental Stage Matter for Real Exchange Rate Volatility? A Cross-Country Analysis (2010) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:24868

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

 
Page updated 2025-03-24
Handle: RePEc:pra:mprapa:24868