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REAL EXCHANGE RATE DYNAMICS IN TRANSITION ECONOMIES: A NONLINEAR ANALYSIS
Author(s) -
Nusair Salah A.
Publication year - 2013
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1460
Subject(s) - economics , unit root , nonlinear system , econometrics , exchange rate , null hypothesis , transition (genetics) , keynesian economics , monetary economics , physics , chemistry , biochemistry , quantum mechanics , gene
This article examines the behaviour of the real exchange rates for 18 transition economies using nonlinear models. We find strong evidence of nonlinearities in 16 of the 18 countries. Contrary to widely held belief that the behaviour of real exchange rates should exhibit symmetrical adjustment for deviations above and below its equilibrium level, we find strong evidence of asymmetrical adjustment in 12 of the 16 countries for which the null hypothesis of linearity is rejected. Applying nonlinear unit root tests reveals evidence of stationarity in all the cases except for Poland. Copyright © 2012 John Wiley & Sons, Ltd.