Real exchange rates in Latin America : what does the 20th century reveal?

Using a new data set for the whole period 1900-2005, this paper analyses the behaviour of real multilateral exchange rates in the six largest economies of Latin America. The main aims are to identify any trends or shifts in the equilibrium position and to test for mean reversion. The key findings are the following: i) evidence of real depreciation at the end of the period, compared to the starting position; ii) significant differences in real exchange rates derived using symmetric and asymmetric definitions; iii) a moderate level of intracountry synchronicity, though results vary across periods and pairs of countries; iv) not rejection of the unit-root hypothesis for the series in levels; however, v) the series can be made stationary after allowing for trends structural breaks. For the adjusted series, the half-life of the process ranges from 0.8 to 2.5 years.