Long Run Determinants of Real Exchange Rates in Latin America

Autores
Carrera, Jorge Eduardo; Restout, Romain
Año de publicación
2008
Idioma
inglés
Tipo de recurso
documento de trabajo
Estado
versión enviada
Descripción
This paper investigates the long run behavior of real exchange rates in nineteen countries of Latin America over the period 1970 - 2006. Our data does not support the Purchasing Power Parity (PPP) hypothesis, implying that real shocks tend to have permanent effects on Latin America's real exchange rates. By exploiting the advantage of non stationary panel econometrics, we are able to determinate factors that drive real exchanges rate in the long run : the Balassa-Samuelson effect, government spending, the terms of trade, the openness degree, foreign capital flows and the de facto nominal exchange regime. The latter effect has policy implications since we find that a fixed regime tends to appreciate the real exchange rate. This finding shows the non neutrality of exchange rate regime regarding its effects on real exchange rates. We also run estimations for country subgroups (South America versus Caribbean and Central America). Regional results highlight that several real exchange rates determinants are specific to one geographic zone. Finally, we compute equilibrium real exchange rate estimations. Two main results are derived from the investigation of misalignments, [i ] eight real exchange rates are quite close to their equilibrium level in 2006, and [ii ] our model shows that a part of currencies crises that arose in Latin America was preceded by a real exchange rate overvaluation.
Facultad de Ciencias Económicas
Materia
Ciencias Económicas
Equilibrium real exchange rate
Panel cointegration
Panel unit roots
Nivel de accesibilidad
acceso abierto
Condiciones de uso
http://creativecommons.org/licenses/by-nc-sa/4.0/
Repositorio
SEDICI (UNLP)
Institución
Universidad Nacional de La Plata
OAI Identificador
oai:sedici.unlp.edu.ar:10915/128733

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network_name_str SEDICI (UNLP)
spelling Long Run Determinants of Real Exchange Rates in Latin AmericaCarrera, Jorge EduardoRestout, RomainCiencias EconómicasEquilibrium real exchange ratePanel cointegrationPanel unit rootsThis paper investigates the long run behavior of real exchange rates in nineteen countries of Latin America over the period 1970 - 2006. Our data does not support the Purchasing Power Parity (PPP) hypothesis, implying that real shocks tend to have permanent effects on Latin America's real exchange rates. By exploiting the advantage of non stationary panel econometrics, we are able to determinate factors that drive real exchanges rate in the long run : the Balassa-Samuelson effect, government spending, the terms of trade, the openness degree, foreign capital flows and the de facto nominal exchange regime. The latter effect has policy implications since we find that a fixed regime tends to appreciate the real exchange rate. This finding shows the non neutrality of exchange rate regime regarding its effects on real exchange rates. We also run estimations for country subgroups (South America versus Caribbean and Central America). Regional results highlight that several real exchange rates determinants are specific to one geographic zone. Finally, we compute equilibrium real exchange rate estimations. Two main results are derived from the investigation of misalignments, [i ] eight real exchange rates are quite close to their equilibrium level in 2006, and [ii ] our model shows that a part of currencies crises that arose in Latin America was preceded by a real exchange rate overvaluation.Facultad de Ciencias Económicas2008info:eu-repo/semantics/workingPaperinfo:eu-repo/semantics/submittedVersionDocumento de trabajohttp://purl.org/coar/resource_type/c_8042info:ar-repo/semantics/documentoDeTrabajoapplication/pdfhttp://sedici.unlp.edu.ar/handle/10915/128733enginfo:eu-repo/semantics/altIdentifier/issn/1556-5068info:eu-repo/semantics/altIdentifier/doi/10.2139/ssrn.1127121info:eu-repo/semantics/openAccesshttp://creativecommons.org/licenses/by-nc-sa/4.0/Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0)reponame:SEDICI (UNLP)instname:Universidad Nacional de La Platainstacron:UNLP2025-10-15T11:22:53Zoai:sedici.unlp.edu.ar:10915/128733Institucionalhttp://sedici.unlp.edu.ar/Universidad públicaNo correspondehttp://sedici.unlp.edu.ar/oai/snrdalira@sedici.unlp.edu.arArgentinaNo correspondeNo correspondeNo correspondeopendoar:13292025-10-15 11:22:54.01SEDICI (UNLP) - Universidad Nacional de La Platafalse
dc.title.none.fl_str_mv Long Run Determinants of Real Exchange Rates in Latin America
title Long Run Determinants of Real Exchange Rates in Latin America
spellingShingle Long Run Determinants of Real Exchange Rates in Latin America
Carrera, Jorge Eduardo
Ciencias Económicas
Equilibrium real exchange rate
Panel cointegration
Panel unit roots
title_short Long Run Determinants of Real Exchange Rates in Latin America
title_full Long Run Determinants of Real Exchange Rates in Latin America
title_fullStr Long Run Determinants of Real Exchange Rates in Latin America
title_full_unstemmed Long Run Determinants of Real Exchange Rates in Latin America
title_sort Long Run Determinants of Real Exchange Rates in Latin America
dc.creator.none.fl_str_mv Carrera, Jorge Eduardo
Restout, Romain
author Carrera, Jorge Eduardo
author_facet Carrera, Jorge Eduardo
Restout, Romain
author_role author
author2 Restout, Romain
author2_role author
dc.subject.none.fl_str_mv Ciencias Económicas
Equilibrium real exchange rate
Panel cointegration
Panel unit roots
topic Ciencias Económicas
Equilibrium real exchange rate
Panel cointegration
Panel unit roots
dc.description.none.fl_txt_mv This paper investigates the long run behavior of real exchange rates in nineteen countries of Latin America over the period 1970 - 2006. Our data does not support the Purchasing Power Parity (PPP) hypothesis, implying that real shocks tend to have permanent effects on Latin America's real exchange rates. By exploiting the advantage of non stationary panel econometrics, we are able to determinate factors that drive real exchanges rate in the long run : the Balassa-Samuelson effect, government spending, the terms of trade, the openness degree, foreign capital flows and the de facto nominal exchange regime. The latter effect has policy implications since we find that a fixed regime tends to appreciate the real exchange rate. This finding shows the non neutrality of exchange rate regime regarding its effects on real exchange rates. We also run estimations for country subgroups (South America versus Caribbean and Central America). Regional results highlight that several real exchange rates determinants are specific to one geographic zone. Finally, we compute equilibrium real exchange rate estimations. Two main results are derived from the investigation of misalignments, [i ] eight real exchange rates are quite close to their equilibrium level in 2006, and [ii ] our model shows that a part of currencies crises that arose in Latin America was preceded by a real exchange rate overvaluation.
Facultad de Ciencias Económicas
description This paper investigates the long run behavior of real exchange rates in nineteen countries of Latin America over the period 1970 - 2006. Our data does not support the Purchasing Power Parity (PPP) hypothesis, implying that real shocks tend to have permanent effects on Latin America's real exchange rates. By exploiting the advantage of non stationary panel econometrics, we are able to determinate factors that drive real exchanges rate in the long run : the Balassa-Samuelson effect, government spending, the terms of trade, the openness degree, foreign capital flows and the de facto nominal exchange regime. The latter effect has policy implications since we find that a fixed regime tends to appreciate the real exchange rate. This finding shows the non neutrality of exchange rate regime regarding its effects on real exchange rates. We also run estimations for country subgroups (South America versus Caribbean and Central America). Regional results highlight that several real exchange rates determinants are specific to one geographic zone. Finally, we compute equilibrium real exchange rate estimations. Two main results are derived from the investigation of misalignments, [i ] eight real exchange rates are quite close to their equilibrium level in 2006, and [ii ] our model shows that a part of currencies crises that arose in Latin America was preceded by a real exchange rate overvaluation.
publishDate 2008
dc.date.none.fl_str_mv 2008
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dc.language.none.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv info:eu-repo/semantics/altIdentifier/issn/1556-5068
info:eu-repo/semantics/altIdentifier/doi/10.2139/ssrn.1127121
dc.rights.none.fl_str_mv info:eu-repo/semantics/openAccess
http://creativecommons.org/licenses/by-nc-sa/4.0/
Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0)
eu_rights_str_mv openAccess
rights_invalid_str_mv http://creativecommons.org/licenses/by-nc-sa/4.0/
Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0)
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