English (United Kingdom)

https://curated-unify.zendy.io/wp-json/zendy-region/v1/featured_content/oa?rat=en

https://curated-unify.zendy.io/wp-json/zendy-region/v1/highlighted_journal/

Zendy Plus

Presents the access of premium content as premium feature

Premium Content

Presents the keyphrase highlighting as premium feature

Keyphrase Highlighting

Presents the summarisation as premium feature

Summarisation

Insights

Presents the pdf analysis as premium feature

PDF Analysis

Presents the zaia usage as premium feature

ZAIA

Zendy Tools

Zendy Open

This paper investigates the long run behavior of real exchange rates in nineteen countries of Latin America over the period 1970 - 2006. Our data does not support the Purchasing Power Parity (PPP) hypothesis, implying that real shocks tend to have permanent eects on Latin America's real exchange rates. By exploiting the advantage of non stationary panel econometrics, we are able to determinate factors that drive real exchanges rate in the long run : the Balassa-Samuelson eect, government spending, the terms of trade, the openness degree, foreign capital flows and the de facto nominal exchange regime. The latter eect has policy implications since we find that a fixed regime tends to appreciate the real exchange rate. This finding shows the non neutrality of exchange rate regime regarding its eects on real exchange rates. We also run estimations for country subgroups (South America versus Caribbean and Central America). Regional results highlight that several real exchange rates determinants are specific to one geographic zone. Finally, we compute equilibrium real exchange rate estimations. Two main results are derived from the investigation of misalignments, (i) eight real exchange rates are quite close to their equilibrium level in 2006, and (ii) our model shows that a part of currencies crises that arose in Latin America was preceded by a real exchange rate overvaluation.

Long Run Determinants of Real Exchange Rates in Latin America