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Brian Francis and Sunday Iyare
 
''Do exchange rates in caribbean and latin american countries exhibit nonlinearities? ''
( 2006, Vol. 6 No.14 )
 
 
This paper applies the recently developed Kapetanios et al. (2003) nonlinear stationary test to annual time series data on real exchange rates in selected Caribbean and Latin American countries over the period 1980-2003, to determine whether or not these real exchange rates exhibit nonlinearities. Generally, the ADF rejects the null hypothesis of a unit root in real exchange rates for most of the countries in our study, whereas the Kapetanios et al. (2003) test fails to reject the null hypothesis of a unit root in real exchange rates for most countries. The fact that the real exchange rates in most of the countries included in our study are nonlinear stationary implies that the nominal exchange rate and relative price are cointegrated irrespective of which price indices are used to compute the real exchange rate.
 
 
Keywords:
JEL: F3 - International Finance: General
C2 - Single Equation Models; Single Variables: General
 
Manuscript Received : Sep 07 2005 Manuscript Accepted : Oct 30 2006

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