Real Exchange Rate Volatility: Does the Nominal Exchange Rate Regime Matter?

Author/Editor:

Hong Liang

Publication Date:

October 1, 1998

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

A recent study by Grilli and Kaminsky (1991) argues that real exchange rate (RER) behavior is likely to be dependent on the particular historical period rather than on the nominal exchange rate arrangement itself. This paper reexamines RER behavior using alternative data sets, as well as different econometric methods, over the period 1880-1997. It finds strong evidence supporting the nonneutrality hypothesis of nominal exchange regime on RER volatility. Also, regime shifts play an important role in determining the persistence of shocks to the RER.

Series:

Working Paper No. 1998/147

Subject:

Exchange rate analysis Exchange rate arrangements Exchange rate flexibility Exchange rates Foreign exchange Real exchange rates

English

Publication Date:

October 1, 1998

ISBN/ISSN:

9781451856705/1018-5941

Stock No:

WPIEA1471998

Pages:

38

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