Real Exchange Rate Volatility, Financial Crises and Nominal Exchange Regimes

Documentos de economia y finanzas internacionales (DEFI) 12-05

56 Pages Posted: 19 Oct 2012

See all articles by Amalia Morales-Zumaquero

Amalia Morales-Zumaquero

University of Malaga - Departamento de Teoria e Historia Economica

Simon Sosvilla-Rivero

UCM Institute for Economic Analysis

Date Written: October 15, 2012

Abstract

This paper examines the sources of real exchange rate (RER) volatility in eighty countries around the world, during the period 1970 to 2011. Our main goal is to explore the role of nominal exchange rate regimes and financial crises in explaining the RER volatility. To that end, we employ two complementary procedures that consist in detecting structural breaks in the RER series and decomposing volatility into its permanent and transitory components. The results confirm that exchange rate volatility does increase with the global financial crises and detect the existence of an inverse relationship between the degree of flexibility in the exchange rate regime and RER volatility using a de facto exchange rate classification.

Keywords: Financial Crisis, Structural Breaks, Component-GARCH Model

JEL Classification: G01, C22, C54, F33

Suggested Citation

Morales-Zumaquero, Amalia and Sosvilla-Rivero, Simon, Real Exchange Rate Volatility, Financial Crises and Nominal Exchange Regimes (October 15, 2012). Documentos de economia y finanzas internacionales (DEFI) 12-05. Available at SSRN: https://ssrn.com/abstract=2163584 or http://dx.doi.org/10.2139/ssrn.2163584

Amalia Morales-Zumaquero

University of Malaga - Departamento de Teoria e Historia Economica ( email )

Malaga, Málaga 29004
Spain

Simon Sosvilla-Rivero (Contact Author)

UCM Institute for Economic Analysis ( email )

Carretera de Humera s/n
Madrid, Madrid 28223
Spain
+34913932626 (Phone)

HOME PAGE: http://www.ucm.es/info/ecocuan/ssr/

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