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Nonlinear dynamics of real exchange rates for sectoral data

✍ Scribed by Jaebeom Kim; Young-Kyu Moh

Publisher
John Wiley and Sons
Year
2011
Tongue
English
Weight
90 KB
Volume
16
Category
Article
ISSN
1076-9307

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✦ Synopsis

This paper reexamines the convergence issue by contrasting the half-lives of deviations from purchasing power parity across traded and nontraded goods in real exchange rate models with nonlinear dynamics. More specifically, we employ the exponential smooth transition autoregressive model to investigate nonlinear dynamics of real exchange rates. Our empirical results show that the speed of adjustment coefficients for the traded goods are faster than those for general price and for nontraded goods, implying stronger nonlinear adjustment toward parity.

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