Real Exchange Rate Dynamics Under The Current Float: A Re–Examination
Year: 2003
Type: article
Abstract: Augmented Dickey–Fuller regressions on pooled (but not individual) real exchange rates for the post–1973 period consistently reject the unit root null, even after accounting for cross–sectional dependence. The inference that the series is stationary, however, is not necessarily correct, because these tests strongly over–reject the null in certain circumstances, particularly when the series has a stochastic unit root. We find that bilateral real exchange rates against the US dollar have a stochastic unit root. Out–of–sample prediction exercises for an autoregressive model confirm these findings.
Source: Manchester School
Authors: Michael Bleaney, Stephen J. Leybourne
Institution: University of Nottingham
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2003208975