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Real exchange rate behavior : the recent float from the perspective of the past two centuries

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Lothian, James R. and Taylor, Mark P. (1996) Real exchange rate behavior : the recent float from the perspective of the past two centuries. Journal of Political Economy, 104 (3). pp. 488-509.

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Official URL: http://www.jstor.org/stable/2138861?seq=1#page_sca...

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Abstract

Using annual data spanning two centuries for dollar-sterling and franc-sterling real exchange rates, we find strong evidence of mean-reverting real exchange rate behavior.
Using simple, stationary, autoregressive models estimated on prefloat data, we easily outperform nonstationary real exchange rate models in dynamic forecasting exercises over the recent float. Such stationary univariate equations explain 60-80 percent of the in-sample variation in real exchange rates, although the degree of short-run persistence may be high ...

Item Type: Journal Article
Divisions: Faculty of Social Sciences > Warwick Business School
Journal or Publication Title: Journal of Political Economy
Publisher: University of Chicago Press
ISSN: 0022-3808
Official Date: 1996
Dates:
DateEvent
1996Published
Volume: 104
Number: 3
Page Range: pp. 488-509
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access
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