Mean reversion in long-horizon real exchange rates: evidence from Latin America

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• dc.contributor.author Astorga Junquera, Pablo
• dc.date.accessioned 2019-10-01T11:39:30Z
• dc.date.available 2019-10-01T11:39:30Z
• dc.date.issued 2012
• dc.description.abstract This paper examines mean reversion in real effective exchange rates in six leading Latin American economies during the XXth century using a new data set. A unit-root approach is complemented by an error-correction model including key fundamentals such as terms of trade, trade openness and relative productivities. Unit-root testing shows a very slow process of reversion – if any – to a constant mean in the original series, rejecting the strict PPP hypothesis; however, mean reversion is found after allowing for trends and structural breaks with a half-life average of 1½ years for the six countries. We also found reversion to a conditional mean defined by the co-integrating relationship with an average half-life of 2½ years. Our estimates, although lower than the 3–5 year range that motivated the Rogoff’s puzzle, still indicate the presence of important obstacles to the adjustment process that need further investigation.
• dc.format.mimetype application/pdf
• dc.identifier.citation Astorga Junquera, P. Mean reversion in long-horizon real exchange rates: evidence from Latin America. J Int Money Finan. 2012 Oct;31(6):1529-50. DOI: 10.1016/j.jimonfin.2012.02.014
• dc.identifier.doi http://dx.doi.org/10.1016/j.jimonfin.2012.02.014
• dc.identifier.issn 0261-5606
• dc.identifier.uri http://hdl.handle.net/10230/42369
• dc.language.iso eng
• dc.publisher Elsevier
• dc.relation.ispartof Journal of International Money and Finance. 2012 Oct;31(6):1529-50
• dc.rights © Elsevier https://doi.org/10.1016/j.jimonfin.2012.02.014
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.subject.keyword Real exchange rates
• dc.subject.keyword Purchasing power parity
• dc.subject.keyword Mean reversion
• dc.subject.keyword Economic development
• dc.subject.keyword Latin America
• dc.title Mean reversion in long-horizon real exchange rates: evidence from Latin America
• dc.type info:eu-repo/semantics/article
• dc.type.version info:eu-repo/semantics/acceptedVersion