Nonlinear Real Exchange Rate Adjustments: Insights from iPad Price Data

Hylton Hollander, Ernest Edward Walker (), Dawid van Lill () and Gideon du Rand ()
Additional contact information
Ernest Edward Walker: Stellenbosch University
Dawid van Lill: South African Reserve Bank
Gideon du Rand: South African Reserve Bank
Authors registered in the RePEc Author Service: Manoel Bittencourt

No 92, ERSA Working Paper Series from Economic Research Southern Africa

Abstract: We investigate nonlinear real exchange rate (RER) dynamics using a high-frequency panel dataset of Apple iPad prices across global markets. Our findings challenge the conventional view of slow RER adjustment by demonstrating that larger mispricings are corrected much faster, while smaller deviations persist for longer periods. We identify a valuation threshold effect, where smaller deviations behave like unit root processes, while larger discrepancies are more quickly mean-reverting. Furthermore, the magnitude of these thresholds diminishes as the time horizon of evaluation increases. Transaction costs play a crucial role in shaping these dynamics, with higher costs associated with wider thresholds for arbitrage activity. Additionally, the results reveal asymmetry in RER adjustments, where undervaluations are corrected more rapidly than overvaluations. These findings provide new insights into the speed and nature of RER adjustments, suggesting that product-specific price data, such as that from iPads, can offer a more granular understanding of international price convergence.

Keywords: Nonlinear Real Exchange Rate Adjustments; Law of One Price (LOP); High-Frequency Data; Threshold Effects; Apple iPads (search for similar items in EconPapers)
JEL-codes: C22 C23 E31 F31 F41 (search for similar items in EconPapers)
Date: 2024-11
References: Add references at CitEc
Citations:

Published in ERSA Working Paper Series, November 2024

Downloads: (external link)
https://ersawps.org/index.php/working-paper-series/article/view/92/107 First version, 2024 (application/pdf)

Related works:
Journal Article: Nonlinear real exchange rate adjustments: Insights from iPad price data (2026)
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:rza:ersawp:92

Access Statistics for this paper

More papers in ERSA Working Paper Series from Economic Research Southern Africa
Bibliographic data for series maintained by Maggi Sigg ().