Details
| Original language | English |
|---|---|
| Pages (from-to) | 356-379 |
| Number of pages | 24 |
| Journal | Oxford Bulletin of Economics and Statistics |
| Volume | 84 |
| Issue number | 2 |
| Early online date | 19 Oct 2021 |
| Publication status | Published - 17 Mar 2022 |
Abstract
We propose a new nonlinear Markov-STAR model to capture both the Markov switching and smooth transition dynamics for real exchange rates. We derive stationarity conditions for the model and apply it to the real exchange rates of 17 countries. We relate switching equilibrium rates and volatilities to a set of relevant macroeconomic variables and find, consistent with economic intuitions, that an economy deteriorating relative to the US economy tends to see a significantly increased likelihood of real exchange rate depreciation. Moreover, we document significant connections between rising economic uncertainties and real exchange rate changes as well as exchange rate volatility.
ASJC Scopus subject areas
- Mathematics(all)
- Statistics and Probability
- Social Sciences(all)
- Social Sciences (miscellaneous)
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
- Decision Sciences(all)
- Statistics, Probability and Uncertainty
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In: Oxford Bulletin of Economics and Statistics, Vol. 84, No. 2, 17.03.2022, p. 356-379.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Real Exchange Rates and Fundamentals in a new Markov-STAR Model*
AU - Bertram, Philip
AU - Flock, Teresa
AU - Ma, Jun
AU - Sibbertsen, Philipp
N1 - Funding Information: *We gratefully acknowledge the support of the Deutsche Forschungsgemeinschaft under grant SI 745/9‐1. The helpful comments of Christian Conrad, Timo Terasvirta, Rolf Tschernig, the editor Jonathan Temple, two anonymous referees and the participants of the SNDE 2016 meeting are gratefully acknowledged.
PY - 2022/3/17
Y1 - 2022/3/17
N2 - We propose a new nonlinear Markov-STAR model to capture both the Markov switching and smooth transition dynamics for real exchange rates. We derive stationarity conditions for the model and apply it to the real exchange rates of 17 countries. We relate switching equilibrium rates and volatilities to a set of relevant macroeconomic variables and find, consistent with economic intuitions, that an economy deteriorating relative to the US economy tends to see a significantly increased likelihood of real exchange rate depreciation. Moreover, we document significant connections between rising economic uncertainties and real exchange rate changes as well as exchange rate volatility.
AB - We propose a new nonlinear Markov-STAR model to capture both the Markov switching and smooth transition dynamics for real exchange rates. We derive stationarity conditions for the model and apply it to the real exchange rates of 17 countries. We relate switching equilibrium rates and volatilities to a set of relevant macroeconomic variables and find, consistent with economic intuitions, that an economy deteriorating relative to the US economy tends to see a significantly increased likelihood of real exchange rate depreciation. Moreover, we document significant connections between rising economic uncertainties and real exchange rate changes as well as exchange rate volatility.
UR - http://www.scopus.com/inward/record.url?scp=85117194597&partnerID=8YFLogxK
U2 - 10.1111/obes.12467
DO - 10.1111/obes.12467
M3 - Article
AN - SCOPUS:85117194597
VL - 84
SP - 356
EP - 379
JO - Oxford Bulletin of Economics and Statistics
JF - Oxford Bulletin of Economics and Statistics
SN - 0305-9049
IS - 2
ER -