Non-Linear Trend Stationarity and Co-Trending in Latin American Real Exchange Rates

12 Pages Posted: 2 Dec 2008

See all articles by Mark J. Holmes

Mark J. Holmes

University of Waikato - Management School, Department of Economics

Date Written: November 27, 2008

Abstract

This paper offers a new insight into real exchange rate behaviour in Latin America. Using quarterly data over the sample period 1973Q2-2005Q4, the analysis indicates that the real exchange rates of Argentina, Brazil and Venezuala can be described as non-linear trend stationary processes. This finding is in contrast to most existing studies of Latin American real exchange rate behaviour that focus on linear adjustments. Further analysis reveals that Latin American real exchanges are co-trended insofar as they share a common non-linear trend.

Keywords: Latin America, real exchange rate, non-linear, stationarity, unit root tests

JEL Classification: F0, F3, C2

Suggested Citation

Holmes, Mark J., Non-Linear Trend Stationarity and Co-Trending in Latin American Real Exchange Rates (November 27, 2008). Applied Econometrics and International Development, Vol. 8, No. 1, 2008. Available at SSRN: https://ssrn.com/abstract=1308255

Mark J. Holmes (Contact Author)

University of Waikato - Management School, Department of Economics ( email )

Hamilton
New Zealand

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