Nonlinear Adjustment of the Real Exchange Rate Towards its Equilibrium Value: A Panel Smooth Transition Error Correction Modelling

Sophie Bereau, Agnès Bénassy-Quéré, Valérie Mignon

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Résumé

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.
langue originaleAnglais
Pages (de - à)404-416
Nombre de pages13
journalEconomic Modelling
Volume27
Numéro de publication1
Les DOIs
étatPublié - 2010

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