TY - JOUR
T1 - Nonlinear Adjustment of the Real Exchange Rate Towards its Equilibrium Value
T2 - A Panel Smooth Transition Error Correction Modelling
AU - Bereau, Sophie
AU - Bénassy-Quéré, Agnès
AU - Mignon, Valérie
PY - 2010
Y1 - 2010
N2 - 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 may be unable to unwind alone global imbalances.
AB - 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 may be unable to unwind alone global imbalances.
KW - Equilibrium exchange rate
KW - BEER model
KW - Panel smooth transition regression
U2 - https://doi.org/10.1016/j.econmod.2009.10.007
DO - https://doi.org/10.1016/j.econmod.2009.10.007
M3 - Article
SN - 1873-6122
VL - 27
SP - 404
EP - 416
JO - Economic Modelling
JF - Economic Modelling
IS - 1
ER -