REAL EXCHANGE RATE DYNAMICS IN TRANSITION ECONOMIES: A NONLINEAR ANALYSIS

Salah A. Nusair

8 citations0/0 files storedInternational Journal of Finance & Economics

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Monetary Policy and Economic Impact Global Financial Crisis and Policies Financial Risk and Volatility Modeling

Abstract

ABSTRACT This article examines the behaviour of the real exchange rates for 18 transition economies using nonlinear models. We find strong evidence of nonlinearities in 16 of the 18 countries. Contrary to widely held belief that the behaviour of real exchange rates should exhibit symmetrical adjustment for deviations above and below its equilibrium level, we find strong evidence of asymmetrical adjustment in 12 of the 16 countries for which the null hypothesis of linearity is rejected. Applying nonlinear unit root tests reveals evidence of stationarity in all the cases except for Poland. Copyright © 2012 John Wiley & Sons, Ltd.

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References

1989The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis 2002Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis 1996The Purchasing Power Parity Puzzle 1992Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis 2002Testing for a unit root in the nonlinear STAR framework 2002Dynamic Panel Estimation and Homogenity Testing Under Cross Section Dependence 1998Unit-Root Tests and Asymmetric Adjustment With an Example Using the Term Structure of Interest Rates 1997Threshold Cointegration

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