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Nonlinearities in real exchange rate determination: do African exchange rates follow a random walk?

[journal article]

Cuestas, Juan Carlos; Mourelle, Estefania

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Abstract In this paper we aim at modelling the long run behaviour of the Real Effective Exchange Rates (REER) for a pool of African countries. Not much attention has been paid to this group of countries, in particular, to the existence of nonlinearities in the long run path of such a variable. Controlling for two sources of nonlinearites, i.e. asymmetric adjustment to equilibrium and nonlinear deterministic trends allows us to gain some insight about the behaviour of the African REER. We find that these sources of nonlinearites help us to explain the apparent unit root behaviour found applying linear unit root tests for most of the countries.
Classification Political Economy; Economic Statistics, Econometrics, Business Informatics
Free Keywords PPP; Real Exchange Rate; Unit Roots; Nonlinearities
Publication Year 2009
Page/Pages p. 243-258
Journal Applied Economics, 43 (2009) 2
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)