Persistence of real exchange rates in the Central and Eastern European countries

Journal of Business Economics and Management

Ahmad Zubaidi Baharumshah¹  Siew-Voon Soon¹  Stilianos Fountas²  Nurul Sima Mohamad Shariff³ 

[1] Department of Economics, Faculty of Economics and Management, Universiti Putra Malaysia, 43400 UPM Serdang Selangor, Malaysia;Department of Economics, University of Macedonia, 156 Egnatia Street, GR-540 06 Thessaloniki, Greece;Faculty of Science and Technology,Universiti Sains Islam Malaysia, Bandar Baru Nilai 71800 Nilai, Malaysia;

关键词: half-lives;    local persistence;    structural breaks;    real exchange rate;    PPP puzzle;    transition economies;   

DOI  :  10.3846/16111699.2015.1101396

来源: DOAJ

【 摘 要 】

We investigate the mean reversion in real exchange rates for Central and Eastern European countries. We use point and confidence interval estimates from the Phillips et al.’s (2001) local-persistent model as our preferred measures of the persistence of real exchange rates. We find that the adjustment to purchasing power parity is more rapid after accounting for structural breaks, with half-life deviation from parity below 18 months, which is consistent with the explanation based on nominal rigidities. The estimated narrow confidence intervals for the half-lives invalidate the purchasing power parity puzzle for transition and some core European Union countries. The novelty of our results lies in the finding of strong evidence for purchasing power parity as the local-persistent model produces shorter half-lives and much narrower corresponding confidence intervals than those obtained by standard Dickey-Fuller and local-to-unity models. Our evidence for PPP suggests that the transition countries have maintained their long-run competitiveness against their trading partners.

【 授权许可】

Unknown