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

38 Pages Posted: 15 Feb 2006

See all articles by Hong Liang

Hong Liang

International Monetary Fund (IMF)

Date Written: October 1998

Abstract

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.

Keywords: Exchange rate regimes, real exchange rate, volatility

JEL Classification: F31, F33, F41

Suggested Citation

Liang, Hong, Real Exchange Rate Volatility: Does the Nominal Exchange Rate Regime Matter? (October 1998). IMF Working Paper No. 98/147, Available at SSRN: https://ssrn.com/abstract=882719

Hong Liang (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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