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Real exchange rates and developing countries

Kanas, Angelos (2009) Real exchange rates and developing countries. International Journal of Finance and Economics, 14 (3). pp. 280-299. ISSN 1076-9307. (doi:10.1002/ijfe.378) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL
http://dx.doi.org/10.1002/ijfe.378

Abstract

As the real exchange rate of developing countries is especially vulnerable to stochastic events, standard unit root tests do not capture such events adequately. Using a Markov switching extension of the ADF test, which incorporates stochastic regime switching, we address the issue of real exchange rate stationarity for 43 developing countries. We find strong statistical evidence that this approach is preferred to the standard ADF for all countries considered. For 36 countries, there is strong evidence of regime-dependent stationarity, namely there is a regime in which the real exchange rate is stationary and another regime in which the real exchange rate is non-stationary. This suggests that over a sample period, there are sub-periods of stationarity and sub-periods of non-stationarity. We identify those sub-periods and assess their average duration and regime persistence. The results, robust to alternative sample periods, indicate that there exists sample-dependence in unit root results in previous studies, and help bridge the gap between conflicting results of these studies. Copyright © 2008 John Wiley & Sons, Ltd.

Item Type: Article
DOI/Identification number: 10.1002/ijfe.378
Additional information: Unmapped bibliographic data: AD - Department of Economics, University of Crete, Crete, Greece [Field not mapped to EPrints] AD - IACM, FORTH-HELLAS, Crete, Greece [Field not mapped to EPrints] JA - Int. J. Financ. Econ. [Field not mapped to EPrints]
Uncontrolled keywords: Developing countries, PPP, Real exchange rate, Regime switching, Stochastic unit roots, developing world, econometrics, Markov chain, purchasing power parity, real exchange rate, stochasticity
Subjects: H Social Sciences > HG Finance
Divisions: Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Tracey Pemble
Date Deposited: 22 May 2014 12:14 UTC
Last Modified: 29 May 2019 12:36 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/41138 (The current URI for this page, for reference purposes)
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