Nonlinearities and real exchange rate dynamics

Jean Imbs, Haroon Mumtaz, Morten O. Ravn, Hélène Rey

Research output: Contribution to journalArticle

Abstract

We confirm the presence of substantial nonlinearities in real exchange rate dynamics at the sectoral level. There exists zones where arbitrage is not profitable because of transaction costs, and thus mean reversion is inexistent. We compute the speed of mean reversion of sector specific real exchange rates, conditional on the existence of arbitrage as implied by our nonlinear estimations, and relate them to plausible economic determinants such as tradability and exchange rate volatility.

Original languageEnglish (US)
Pages (from-to)639-649
Number of pages11
JournalJournal of the European Economic Association
Volume1
Issue number2-3
DOIs
StatePublished - Jan 1 2003

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Mean reversion
Arbitrage
Real exchange rate
Nonlinearity
Exchange rate dynamics
Economics
Transaction costs
Nonlinear estimation
Exchange rate volatility

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

Cite this

Nonlinearities and real exchange rate dynamics. / Imbs, Jean; Mumtaz, Haroon; Ravn, Morten O.; Rey, Hélène.

In: Journal of the European Economic Association, Vol. 1, No. 2-3, 01.01.2003, p. 639-649.

Research output: Contribution to journalArticle

Imbs, Jean ; Mumtaz, Haroon ; Ravn, Morten O. ; Rey, Hélène. / Nonlinearities and real exchange rate dynamics. In: Journal of the European Economic Association. 2003 ; Vol. 1, No. 2-3. pp. 639-649.
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