Structural Breaks in the Real Exchange Rate Mechanism

34 Pages Posted: 27 Jul 2006

See all articles by Laurence Copeland

Laurence Copeland

Cardiff University - Cardiff Business School

Saeed Heravi

Cardiff University

Date Written: July 11, 2006

Abstract

We show that the behaviour of the real exchange rates of the UK, Germany, France and Japan has been characterised by structural breaks which changed the adjustment mechanism. In the context of a Time-Varying Smooth Transition AutoRegressive of the kind introduced by Lundbergh et al (2003), we show that the real exchange rate process shifted in the aftermath of Black Wednesday in the case of the Pound, in 1984-5 in the case of the Franc and, more tentatively, during the Asian crisis of 1997-8 in the case of the Yen.

Keywords: real exchange rates, PPP, TV-STAR

JEL Classification: C22, F31, G15

Suggested Citation

Copeland, Laurence S. and Heravi, Saeed, Structural Breaks in the Real Exchange Rate Mechanism (July 11, 2006). Available at SSRN: https://ssrn.com/abstract=918831 or http://dx.doi.org/10.2139/ssrn.918831

Laurence S. Copeland (Contact Author)

Cardiff University - Cardiff Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 20875740 (Phone)
+44 29 20874419 (Fax)

Saeed Heravi

Cardiff University ( email )

Aberconway Building
Colum Drive
CF10 3EU Cardiff, Wales CF10 3EU
United Kingdom

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