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Do exchange rates in caribbean and latin american countries exhibit nonlinearities?

Author

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  • Brian Francis

    (University of the West Indies, Cave Hill Campus)

  • Sunday Iyare

    (University of the West Indies, Cave Hill Campus)

Abstract

This paper applies the recently developed Kapetanios et al. (2003) nonlinear stationary test to annual time series data on real exchange rates in selected Caribbean and Latin American countries over the period 1980-2003, to determine whether or not these real exchange rates exhibit nonlinearities. Generally, the ADF rejects the null hypothesis of a unit root in real exchange rates for most of the countries in our study, whereas the Kapetanios et al. (2003) test fails to reject the null hypothesis of a unit root in real exchange rates for most countries. The fact that the real exchange rates in most of the countries included in our study are nonlinear stationary implies that the nominal exchange rate and relative price are cointegrated irrespective of which price indices are used to compute the real exchange rate.

Suggested Citation

  • Brian Francis & Sunday Iyare, 2006. "Do exchange rates in caribbean and latin american countries exhibit nonlinearities?," Economics Bulletin, AccessEcon, vol. 6(14), pages 1-20.
    • Handle: RePEc:ebl:ecbull:eb-05f30009
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    References listed on IDEAS

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    Cited by:

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    3. Yu Hsing, 2009. "The Determination Of The Costa Rica Colon/Usd Exchange Rate," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 3(1), pages 79-87.

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    JEL classification:

    • F3 - International Economics - - International Finance
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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