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Persistent misalignments of the European exchange rates: some evidence from non-linear cointegration

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The asymmetric and persistent adjustment of the European real exchange rates is investigated using the framework of non-linear cointegration. The episodes of slow mean-reversion dynamics over the period from 1979 to 1999 are explained. A test of unit root against STAR cointegration is proposed and some complete estimations and stochastic simulations of ESTAR models are presented. The presence of effective non-linear adjustment during the moving of the currencies to their long-run fundamental equilibrium exchange rate value is discussed.

Document Type: Research Article


Affiliations: 1: ERUDITE, Université Paris 12 et GREQAM-CNRS, 2 rue de la Vieille Charité, 13002 Marseille, France 2: MODEM, Université Paris 10 et C3ED, Université de Versailles, UFR de Saint-Quentin en Yvelines, 47 boulevard Vauban, 78280, Guyancourt, France 3: THEMA, Université Paris 10 – Faculté de Sciences Economiques, 200 avenue de la République, 92001 Nanterre Cedex, France 4: GREQAM-CNRS, Centre de la Vieille Charité, 2 rue de la Vieille Charité, 13002 Marseille, France

Publication date: February 10, 2006

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