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Can a pure real business cycle model explain the real exchange rate: the case of Ukraine

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  • Kateryna Onishchenko

Abstract

Real exchange rate (RER) is an important instrument for restoring sustainable economic growth in the small open economy with large export share. RER of Ukrainian currency can be explained within the real business cycle (RBC) framework without any forms of nominal rigidities. Fitting Ukrainian quarterly data for the period of 1996:Q1-2009:Q3 into the small open economy RBC model and testing it by method of indirect inference shows that RER can be reproduced by RBC framework. The generated pseudo-samples for RER by method of bootstrapping allow to obtain the distribution of the best fit ARIMA(2,1,4) parameters and to show with the Wald statistics that those parameters lie within 95% confidence intervals of those estimated for bootstrapped pseudo-Q parameters.

Suggested Citation

  • Kateryna Onishchenko, 2012. "Can a pure real business cycle model explain the real exchange rate: the case of Ukraine," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 4(2), pages 111-135.
    • Handle: RePEc:ids:ijsuse:v:4:y:2012:i:2:p:111-135
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    More about this item

    Keywords

    sustainable economic growth; business cycle; RERs; real exchange rates; small open economies; indirect inference; ARIMA; autoregressive integrated moving average; sustainable economy; sustainability; Ukraine.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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