Taylor, Mark P., 1958- and Sarno, Lucio. (2001) Real exchange rate dynamics in transition economies: a nonlinear analysis. Studies in Nonlinear Dynamics and Econometrics, Vol.5 (No.3). pp. 153-177. ISSN 1558-3708

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Abstract

We examine the behavior of the real exchange rates of nine transition economies during the 1990s. We propose an empirical model rationalized on the basis of standard economic models in the tradition of Mundell-Fleming-Dornbusch and Harrod-Balassa-Samuelson, allowing explicitly for real interest rate differentials and (implicitly) for productivity differentials to have an impact on real exchange rate equilibrium and employing nonlinear modeling techniques that are consistent with recently developed economic theories and observed regularities. Using a nonlinear multivariate generalization of the Beveridge-Nelson decomposition applied to our models, we also identify the permanent and temporary components of these real exchange rates implied by our estimates. The results have a natural interpretation and clear policy implications.

Item Type:	Journal Article
Subjects:	H Social Sciences > HG Finance
Divisions:	Faculty of Social Sciences > Warwick Business School Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Foreign exchange rates, Economics, Mathematical, Economic development -- Europe, Eastern, Europe, Eastern -- Economic conditions -- Econometric models, Europe, Eastern -- Economic conditions -- 1989-, Europe, Eastern -- Foreign economic relations
Journal or Publication Title:	Studies in Nonlinear Dynamics and Econometrics
Publisher:	Berkeley Electronic Press
ISSN:	1558-3708
Date:	October 2001
Volume:	Vol.5
Number:	No.3
Page Range:	pp. 153-177
Identification Number:	10.2202/1558-3708.1077
Status:	Peer Reviewed
Access rights to Published version:	Open Access
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URI:	http://wrap.warwick.ac.uk/id/eprint/883

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