IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/49502.html
   My bibliography  Save this paper

Le comportement des taux de change réels européens de la fin Bretton Woods à l’adoption de l’euro
[The behavior of European real exchange rates from the Bretton Woods system end to the adoption of the euro]

Author

Listed:
  • Rey, Serge
  • Varachaud, Pascal

Abstract

This article examines the PPP hypothesis, i.e. the proposition that the real exchange rates are stationary, in the case of Europe. For that purpose, we study the statistical properties of 14 European bilateral real exchange rates against the Deutschmark, over the periods snake and EMS. These rates are constructed using different indexes: consumer prices, wholesale prices and unit labor costs. The results of unit-root tests show that globally there is little evidence to support PPP, i.e. the stationarity of the real exchange rates. At the most, some mean-reverting processes are verified. Furthermore, general PPP with consumer prices is only verified between France and Germany. Whether the country is a member of the snake and/or of the EMS have not influence on results.

Suggested Citation

  • Rey, Serge & Varachaud, Pascal, 2000. "Le comportement des taux de change réels européens de la fin Bretton Woods à l’adoption de l’euro [The behavior of European real exchange rates from the Bretton Woods system end to the adoption of ," MPRA Paper 49502, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:49502
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/49502/1/MPRA_paper_49502.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Paul DE GRAUWE & Hilde Heens, 1993. "Real Exchange Rate Variability in Monetary Unions," Discussion Papers (REL - Recherches Economiques de Louvain) 1993015, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. Schwert, G William, 2002. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 5-17, January.
    3. Michael F. Bleaney & Stephen J. Leybourne & Paul Mizen, 1999. "Mean Reversion of Real Exchange Rates in High-Inflation Countries," Southern Economic Journal, John Wiley & Sons, vol. 65(4), pages 839-854, April.
    4. repec:bla:scandj:v:91:y:1989:i:2:p:401-32 is not listed on IDEAS
    5. Barry Eichengreen., 1993. "The Crisis in the EMS and the Transition to EMU: An Interim Assessment," Center for International and Development Economics Research (CIDER) Working Papers C93-022, University of California at Berkeley.
    6. von Hagen, Jurgen & Neumann, Manfred J M, 1994. "Real Exchange Rates within and between Currency Areas: How Far Away Is EMU?," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 236-244, May.
    7. Stephen J. Leybourne & Paul Newbold, 1999. "The behaviour of Dickey-Fuller and Phillips-Perron tests under the alternative hypothesis," Econometrics Journal, Royal Economic Society, vol. 2(1), pages 92-106.
    8. Montañés, Antonio & Reyes, Marcelo, 1998. "Effect Of A Shift In The Trend Function On Dickey–Fuller Unit Root Tests," Econometric Theory, Cambridge University Press, vol. 14(3), pages 355-363, June.
    9. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    10. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    11. Christiano, Lawrence J, 1992. "Searching for a Break in GNP," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 237-250, July.
    12. Diebold, Francis X & Husted, Steven & Rush, Mark, 1991. "Real Exchange Rates under the Gold Standard," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1252-1271, December.
    13. Granger, C. W. J., 1980. "Long memory relationships and the aggregation of dynamic models," Journal of Econometrics, Elsevier, vol. 14(2), pages 227-238, October.
    14. Yin-Wong Cheung & Hung-Gay Fung & Kon S. Lai & Wai-Chung Lo, 1995. "Purchasing power parity under the European Monetary System," Journal of International Money and Finance, Elsevier, vol. 14(2), pages 179-189, April.
    15. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
    16. Ronald MacDonald, 1985. "Are deviations from purchasing power parity efficient? Some further answers," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 121(4), pages 638-645, December.
    17. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72(6), pages 584-584.
    18. Diebold, Francis X. & Rudebusch, Glenn D., 1989. "Long memory and persistence in aggregate output," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 189-209, September.
    19. Rappoport, Peter & Reichlin, Lucrezia, 1989. "Segmented Trends and Non-stationary Time Series," Economic Journal, Royal Economic Society, vol. 99(395), pages 168-177, Supplemen.
    20. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October.
    21. Whitt, Joseph A, Jr, 1992. "The Long-Run Behavior of the Real Exchange Rate: A Reconsideration," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(1), pages 72-82, February.
    22. Lawrence H. Officer, 1982. "The Relationship Between the Absolute and the Relative PPP Theory of Cassel," History of Political Economy, Duke University Press, vol. 14(2), pages 251-255, Summer.
    23. Baum, Christopher F. & Barkoulas, John T. & Caglayan, Mustafa, 1999. "Long memory or structural breaks: can either explain nonstationary real exchange rates under the current float?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 9(4), pages 359-376, November.
    24. Cheung, Yin-Wong, 1993. "Long Memory in Foreign-Exchange Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 93-101, January.
    25. Vogelsang, Timothy J & Perron, Pierre, 1998. "Additional Tests for a Unit Root Allowing for a Break in the Trend Function at an Unknown Time," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 1073-1100, November.
    26. repec:bla:jfinan:v:43:y:1988:i:4:p:933-48 is not listed on IDEAS
    27. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    28. Meese, R. & Rogoff, K., 1988. "Was It Real? The Exchange Rate-Interest Differential Ralation Over The Modern Floating-Rate Period," Working papers 368, Wisconsin Madison - Social Systems.
    29. Grilli, Vittorio & Kaminsky, Graciela, 1991. "Nominal exchange rate regimes and the real exchange rate : Evidence from the United States and Great Britain, 1885-1986," Journal of Monetary Economics, Elsevier, vol. 27(2), pages 191-212, April.
    30. Banerjee, Anindya & Lumsdaine, Robin L & Stock, James H, 1992. "Recursive and Sequential Tests of the Unit-Root and Trend-Break Hypotheses: Theory and International Evidence," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 271-287, July.
    31. Adler, Michael & Lehmann, Bruce, 1983. "Deviations from Purchasing Power Parity in the Long Run," Journal of Finance, American Finance Association, vol. 38(5), pages 1471-1487, December.
    32. Evans, George W, 1989. "Output and Unemployment Dynamics in the United States: 1950-1985," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(3), pages 213-237, July-Sept.
    33. N/A, 1979. "The European Monetary System," National Institute Economic Review, National Institute of Economic and Social Research, vol. 87(1), pages 5-12, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Niels Haldrup & Robinson Kruse & Timo Teräsvirta & Rasmus T. Varneskov, 2013. "Unit roots, non-linearities and structural breaks," Chapters, in: Nigar Hashimzade & Michael A. Thornton (ed.), Handbook of Research Methods and Applications in Empirical Macroeconomics, chapter 4, pages 61-94, Edward Elgar Publishing.
    2. John D. Levendis, 2018. "Time Series Econometrics," Springer Texts in Business and Economics, Springer, number 978-3-319-98282-3, June.
    3. Darne, Olivier & Diebolt, Claude, 2004. "Unit roots and infrequent large shocks: new international evidence on output," Journal of Monetary Economics, Elsevier, vol. 51(7), pages 1449-1465, October.
    4. Jürgen Wolters & Uwe Hassler, 2006. "Unit root testing," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 90(1), pages 43-58, March.
    5. Banerjee, Anindya & Urga, Giovanni, 2005. "Modelling structural breaks, long memory and stock market volatility: an overview," Journal of Econometrics, Elsevier, vol. 129(1-2), pages 1-34.
    6. Froot, Kenneth A. & Rogoff, Kenneth, 1995. "Perspectives on PPP and long-run real exchange rates," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 32, pages 1647-1688, Elsevier.
    7. Amit Sen, 2007. "On the Distribution of the Break-Date Estimator Implied by the Perron-Type Statistics When the Form of Break is Misspecified," Economics Bulletin, AccessEcon, vol. 3(6), pages 1-19.
    8. Gary L. Shelley & Frederick H. Wallace, 2004. "Testing for Long Run Neutrality of Money in Mexico," Macroeconomics 0402003, University Library of Munich, Germany.
    9. Olivier Darné & Claude Diebolt, 2006. "Chocs temporaires et permanents dans le PIB de la France, du Royaume-Uni et des États-Unis," Revue d'économie politique, Dalloz, vol. 116(1), pages 65-78.
    10. repec:ebl:ecbull:v:3:y:2007:i:6:p:1-19 is not listed on IDEAS
    11. Paulo M. M. Rodrigues, 2013. "Recursive adjustment, unit root tests and structural breaks," Journal of Time Series Analysis, Wiley Blackwell, vol. 34(1), pages 62-82, January.
    12. repec:onb:oenbwp:y::i:28:b:1 is not listed on IDEAS
    13. Pedersen, Torben Mark & Elmer, Anne Marie, 2003. "International evidence on the connection between business cycles and economic growth," Journal of Macroeconomics, Elsevier, vol. 25(2), pages 255-275, June.
    14. Aparicio, Felipe M. & García, Ana, 2003. "Range unit root tests," DES - Working Papers. Statistics and Econometrics. WS ws031126, Universidad Carlos III de Madrid. Departamento de Estadística.
    15. Brodsky, Boris, 2008. "Structural Changes and Unit Roots: Distinguishing Models of Nonstationary Time Series," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 11(3), pages 52-63.
    16. Lee, Jim, 1996. "Testing for a unit root in time series with trend breaks," Journal of Macroeconomics, Elsevier, vol. 18(3), pages 503-519.
    17. Nelson, Charles R & Piger, Jeremy & Zivot, Eric, 2001. "Markov Regime Switching and Unit-Root Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(4), pages 404-415, October.
    18. Paresh Kumar Narayan, 2005. "New evidence on purchasing power parity from 17 OECD countries," Applied Economics, Taylor & Francis Journals, vol. 37(9), pages 1063-1071.
    19. Zeynel Abidin Ozdemir & Mehmet Balcilar & Aysit Tansel, 2013. "International Labour Force Participation Rates By Gender: Unit Root Or Structural Breaks?," Bulletin of Economic Research, Wiley Blackwell, vol. 65, pages 142-164, May.
    20. Gil-Alana, L. A. & Robinson, P. M., 1997. "Testing of unit root and other nonstationary hypotheses in macroeconomic time series," Journal of Econometrics, Elsevier, vol. 80(2), pages 241-268, October.
    21. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
    22. Laura Mayoral, 2006. "Further Evidence on the Statistical Properties of Real GNP," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(s1), pages 901-920, December.

    More about this item

    Keywords

    Real exchange rate; PPP; EMS; unit roots; long memory; mean-reversion; structural breaks.;
    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
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:49502. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.