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Nonlinear dynamics of real exchange rates for sectoral data
Author(s) -
Kim Jaebeom,
Moh YoungKyu
Publication year - 2011
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.421
Subject(s) - purchasing power parity , economics , autoregressive model , nonlinear system , econometrics , exchange rate , relative purchasing power parity , parity (physics) , convergence (economics) , exponential function , macroeconomics , mathematics , physics , mathematical analysis , particle physics , quantum mechanics
This paper reexamines the convergence issue by contrasting the half‐lives of deviations from purchasing power parity across traded and nontraded goods in real exchange rate models with nonlinear dynamics. More specifically, we employ the exponential smooth transition autoregressive model to investigate nonlinear dynamics of real exchange rates. Our empirical results show that the speed of adjustment coefficients for the traded goods are faster than those for general price and for nontraded goods, implying stronger nonlinear adjustment toward parity. Copyright © 2010 John Wiley & Sons, Ltd.