The common-trend and transitory dynamics in real exchange rate fluctuations
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The common-trend and transitory dynamics in real exchange rate fluctuations. / Bergman, Ulf Michael; Cheung, Yin-Wong; Lai, Kon S.
I: Applied Economics, Bind 43, Nr. 1, 2011, s. 1-18.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - The common-trend and transitory dynamics in real exchange rate fluctuations
AU - Bergman, Ulf Michael
AU - Cheung, Yin-Wong
AU - Lai, Kon S.
PY - 2011
Y1 - 2011
N2 - This study examines the behaviour of both Common Trend (CT) and transitory components of Real Exchange Rate (RER) fluctuations under the current float. The CT component is in most cases found to be sizeable, albeit its relative importance can vary considerably across major currencies and its estimate can be sensitive to whether or not long-run Purchasing Power Parity (PPP) is imposed on the data. Further analysis suggests that both CT and transitory innovations are linked much more to interest rate changes than to productivity changes. Accordingly, it is interest rate, not productivity, disturbances that drive the highly persistent RER.
AB - This study examines the behaviour of both Common Trend (CT) and transitory components of Real Exchange Rate (RER) fluctuations under the current float. The CT component is in most cases found to be sizeable, albeit its relative importance can vary considerably across major currencies and its estimate can be sensitive to whether or not long-run Purchasing Power Parity (PPP) is imposed on the data. Further analysis suggests that both CT and transitory innovations are linked much more to interest rate changes than to productivity changes. Accordingly, it is interest rate, not productivity, disturbances that drive the highly persistent RER.
U2 - 10.1080/00036841003742645
DO - 10.1080/00036841003742645
M3 - Journal article
VL - 43
SP - 1
EP - 18
JO - Applied Economics
JF - Applied Economics
SN - 0003-6846
IS - 1
ER -
ID: 18475498