A1 - Sophie Béreau
A1 - Antonia Lopez Villavicencio
A1 - Valérie Mignon
TI - Nonlinear Adjustment of the Real Exchange Rate Towards its Equilibrium Value: a Panel Smooth Transition Error Correction Modelling
IS - 2008-23
T3 - Working Papers
KW - Equilibrium exchange rate
KW - BEER model
KW - Panel smooth transition regression
KW - Panel vector error correction model
N2 -  We study the nonlinear dynamics of the real exchange rate towards its behavioral equilibrium value (BEER) using a Panel Smooth Transition Regression model framework.We show that the real exchange rate convergence process in the long run is characterized by nonlinearities for emerging economies, whereas industrialized countries exhibit a linear pattern. Moreover, there exists an asymmetric behavior of the real exchange rate when facing an over- or an undervaluation of the domestic currency. Finally, our results suggest that the real exchange rate is unable to unwind alone global imbalances.
ER -