Non-linear and non-symmetric exchange-rate adjustment: Evidence from medium- and high-inflation countries

Arghyrou, Michael Georgiou ORCID: https://orcid.org/0000-0001-6222-5086, Boinet, Virginie and Martin, Christopher 2006. Non-linear and non-symmetric exchange-rate adjustment: Evidence from medium- and high-inflation countries. Journal of Economics and Finance 30 (1) , pp. 38-56. 10.1007/BF02834274

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Abstract

This paper analyses a model of non-linear exchange rate adjustment that extends the literature by allowing asymmetric responses to over- and under-valuations. Applying the model to Greece and Turkey, we find that adjustment is asymmetric and that exchange rates depend on the sign as well as the magnitude of deviations, being more responsive to over-valuations than undervaluations. Our findings support and extend the argument that non-linear models of exchange rate adjustment can help to overcome anomalies in exchange rate behaviour. They also suggest that exchange rate adjustment is non-linear in economies where fundamentals models work well.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HB Economic Theory H Social Sciences > HG Finance
Uncontrolled Keywords:	Economics general; Financial Economics; Finance; Banking; Industry Sectors; Finance, Business & Banking
Publisher:	Springer
ISSN:	1055-0925
Last Modified:	21 Oct 2022 09:49
URI:	https://orca.cardiff.ac.uk/id/eprint/37868

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