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N° 2008-23 |
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| October 2008 |
Nonlinear Adjustment of the Real Exchange Rate Towards its Equilibrium Value:
a Panel Smooth Transition Error Correction Modelling |
Sophie Béreau
Antonia Lopez Villavicencio
Valérie Mignon |
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| We study the nonlinear dynamics of the real exchange rate towards its behavioral equilibrium
value (BEER) using a Panel Smooth Transition Regression model framework.We show that
the real exchange rate convergence process in the long run is characterized by nonlinearities
for emerging economies, whereas industrialized countries exhibit a linear pattern. Moreover,
there exists an asymmetric behavior of the real exchange rate when facing an over- or an
undervaluation of the domestic currency. Finally, our results suggest that the real exchange
rate is unable to unwind alone global imbalances. |
Non-technical summary |
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Résumé
non-technique
en français |
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| Full text |
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| Equilibrium exchange rate; BEER model; Panel Smooth Transition Regression;
Panel Vector Error Correction Model |
Keywords |
| F31; C23 |
JEL classification |
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