Real exchange rate volatility, financial crises and exchange-rate regimes



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Morales-Zumaquero, Amalia and Sosvilla-Rivero, Simón (2014) Real exchange rate volatility, financial crises and exchange-rate regimes. Applied Economics, 46 (8). pp. 826-847. ISSN 0003-6846

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This paper examines real exchange rate (RER) volatility in eighty countries around the world, during the period 1970 to 2011. Two main questions are raised: are structural breaks in RER volatility related to changes in exchange-rate regimes or financial crises? And do these two events affect the permanent and transitory components of RER volatility? To answer them, we employ two complementary procedures that consist in detecting structural breaks in the RER series and decomposing volatility into its permanent and transitory components. Our results suggest that structural breaks in RER volatility coincidence with financial crises and certain changes in nominal exchange-rate regimes. Moreover, our findings confirm that RER volatility does increase with the global financial crises and detect that the more flexible the exchange rate regime, the higher the volatility of the RER using a de facto exchange rate classification.

Item Type:Article
Uncontrolled Keywords:Financial Crisis; Structural Breaks; Component-GARCH Model; Real Exchange Rates
Subjects:Social sciences > Economics > Depressions
Social sciences > Economics > Econometrics
Social sciences > Economics > World economy
Social sciences > Economics > Macroeconomics
JEL:G01, C22, C54, F33
ID Code:30655
Deposited On:29 Jun 2015 10:16
Last Modified:19 Dec 2018 09:59

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