The authors would like to thank Chien-Fu Chen, Mei-Lie Chu, Shin-Hung Lin, Timo Teräsvirta, three anonymous referees and the editor Keith Blackburn for technical support and valuable comments. The contributions of participants of the 2008 Annual Conference of the Taiwan Finance Association are gratefully acknowledged. The usual disclaimer applies.
REAL EXCHANGE RATE PERSISTENCE: EVIDENCE FROM THE WESTERN OFFSHOOTS*
Version of Record online: 19 JUN 2012
© 2012 The Authors. The Manchester School © 2012 Blackwell Publishing Ltd and The University of Manchester
The Manchester School
Volume 80, Issue 6, pages 718–739, December 2012
How to Cite
CHANG, M.-J. and CHEN, Y.-W. (2012), REAL EXCHANGE RATE PERSISTENCE: EVIDENCE FROM THE WESTERN OFFSHOOTS. The Manchester School, 80: 718–739. doi: 10.1111/j.1467-9957.2012.02261.x
Manuscript received 30.10.09; final version received 24.8.10.
- Issue online: 9 OCT 2012
- Version of Record online: 19 JUN 2012
This study examines the persistence of real exchange rates for Western Offshoot countries over the post-Bretton Woods System. The aggregate price levels are decomposed into both tradable and non-tradable goods prices by three alternative categories. The median level of half-lives (across methodologies) is 3.27 years for median-unbiased estimation, but about twice as high for smooth transition autoregressive estimation. The median level of persistence (across categories) using a variety of methodologies ranges from 1.10 years for the consumer price index to 37.17 years for the producer price index. The half-lives indicate that considerable heterogeneity exists across alternative categories and methodologies.