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Has the relationship between the real exchange rate and its fundamentals changed over time?

Author

Listed:
  • Juan Carlos Cuestas

    (Department of Economics and IEI, Jaume I University, Castellón de la Plana, Spain; Department of Economics and Finance, Tallinn University of Technology, Tallinn, Estonia)

  • Mercedes Monfort

    (Department of Economics and IEI, Jaume I University, Castellón de la Plana, Spain)

  • Bojan Shimbov

    (Department of Economics and IEI, Jaume I University, Castellón de la Plana, Spain)

Abstract

In this paper we contribute to the literature on determining the real exchange rate by using models that incorporate structural breaks and nonlinearities. We estimate cointegrated dynamic ordinary least squares regressions and quantile regressions. We find that the estimated coefficients for the EU members from central and eastern Europe are different to those for the other member states. We also find that the models are different before and after the crisis that started in 2008, and this affects the outcome of the long-run equations for the EU15 + Cyprus and Malta.

Suggested Citation

  • Juan Carlos Cuestas & Mercedes Monfort & Bojan Shimbov, 2022. "Has the relationship between the real exchange rate and its fundamentals changed over time?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 22(2), pages 68-89.
    • Handle: RePEc:bic:journl:v:22:y:2022:i:2:p:68-89
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    File URL: https://www.tandfonline.com/doi/epdf/10.1080/1406099X.2022.2096732
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    Citations

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    Cited by:

    1. Mohammed Amine Lezar, 2023. "Real Exchange Rate of Moroccan Currency: Appreciated or Depreciated?," International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 89-101, January.
    2. Cuestas, Juan Carlos & Monfort, Mercedes & Ordóñez, Javier, 2024. "Gas price shocks, the current account, and the real exchange rate: An empirical analysis for the EU," Finance Research Letters, Elsevier, vol. 60(C).
    3. Ramona Tiganasu & Gabriela Carmen Pascariu & Dan Lupu, 2022. "Competitiveness, fiscal policy and corruption: evidence from Central and Eastern European countries," Oeconomia Copernicana, Institute of Economic Research, vol. 13(3), pages 667-698, September.

    More about this item

    Keywords

    Real exchange rates; competitiveness; quantile regression; Bayesian; asymmetric model; structural breaks; European integration;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F15 - International Economics - - Trade - - - Economic Integration

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