A nonlinear adjustment in real exchange rates under transaction costs hypothesis in developed and emerging countries

Quantitative Finance and Economics

Ramzi Drissi¹  Jamel Boukhatem² 

[1] 1 College of Islamic Economics and Finance, Umm al Qura University, Saudi Arabia 2 Department of Quantitative Methods, University of Carthage, Carthage, Tunisia;1 College of Islamic Economics and Finance, Umm al Qura University, Saudi Arabia3 Department of Economics, Faculty of Economic Sciences and Management FSEGT, University of Tunis el Manar, El-Manar 2 City, Tunisia;

关键词: real exchange rates;    star models;    purchasing power parity;    nonlinear adjustments;   

DOI  :  10.3934/QFE.2020010

来源: DOAJ

【 摘 要 】

This paper tries to empirically examine the exchange rate deviations to its level under the purchasing power parity (PPP) and transaction costs hypotheses using a battery of newly developed nonlinear approaches. To explain the persistent differences in exchange rates, we use the half-life function analysis with quarterly data over the period 1988Q1–2018Q2 for a panel of 23 developed and emerging countries. Our results show that some deviations to PPP relation may be governed by non-linear dynamics. The adjustment toward the fundamental equilibrium seems to depend on the size and the sign of the gap from the PPP equilibrium. The foreign exchange rate adjustment can be modeled by symmetric process with the ESTAR model and asymmetric process with LSTAR model.

【 授权许可】

Unknown