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

October 1, 1998

Preview Citation

Format: Chicago

Hong Liang. Real Exchange Rate Volatility: Does the Nominal Exchange Rate Regime Matter?, (USA: International Monetary Fund, 1998) accessed November 21, 2024

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.

Subject: Exchange rate analysis, Exchange rate arrangements, Exchange rate flexibility, Exchange rates, Foreign exchange, Real exchange rates

Keywords: Deutsche mark, Europe, Exchange rate analysis, Exchange rate arrangements, Exchange rate flexibility, Exchange rate regime, Exchange rate regimes, Exchange rates, Exchange regime, Floating exchange rate, Null hypothesis, Rate of change, Real exchange rate, Real exchange rates, RER series, RER volatility, U.S. dollar, Volatility, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1998/147
Stock No:

WPIEA1471998
ISBN:

9781451856705
ISSN:

1018-5941

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