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Real exchange rate volatility, financial crises and nominal exchange regimes

Author

Listed:
  • Amalia Morales-Zumaquero

    (Departamento de Teoría e Historia Económica, Facultad de Ciencias Económicas y Empresariales, Universidad de Málaga)

  • Simón Sosvilla-Rivero

    (Departamento de Economía Cuantitativa, Facultad de Ciencias Económicas y Empresariales, Universidad Complutense de Madrid)

Abstract

This paper examines the sources of real exchange rate (RER) volatility in eighty countries around the world, during the period 1970 to 2011. Our main goal is to explore the role of nominal exchange rate regimes and financial crises in explaining the RER volatility. To that end, we employ two complementary procedures that consist in detecting structural breaks in the RER series and decomposing volatility into its permanent and transitory components. The results confirm that exchange rate volatility does increase with the global financial crises and detect the existence of an inverse relationship between the degree of flexibility in the exchange rate regime and RER volatility using a de facto exchange rate classification.

Suggested Citation

  • Amalia Morales-Zumaquero & Simón Sosvilla-Rivero, 2012. "Real exchange rate volatility, financial crises and nominal exchange regimes," Working Papers 12-05, Asociación Española de Economía y Finanzas Internacionales.
    • Handle: RePEc:aee:wpaper:1205
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial Crisis; Structural Breaks; Component-GARCH Model;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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