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oai:recercat.cat:10230/423692025-12-20T17:00:49Zcom_2072_6col_2072_452952

Mean reversion in long-horizon real exchange rates: evidence from Latin America Astorga Junquera, Pablo Real exchange rates Purchasing power parity Mean reversion Economic development Latin America This paper examines mean reversion in real effective exchange rates in six leading Latin American economies during the XXth century using a new data set. A unit-root approach is complemented by an error-correction model including key fundamentals such as terms of trade, trade openness and relative productivities. Unit-root testing shows a very slow process of reversion – if any – to a constant mean in the original series, rejecting the strict PPP hypothesis; however, mean reversion is found after allowing for trends and structural breaks with a half-life average of 1½ years for the six countries. We also found reversion to a conditional mean defined by the co-integrating relationship with an average half-life of 2½ years. Our estimates, although lower than the 3–5 year range that motivated the Rogoff’s puzzle, still indicate the presence of important obstacles to the adjustment process that need further investigation. 2019-10-01T11:39:30Z 2019-10-01T11:39:30Z 2012 info:eu-repo/semantics/article info:eu-repo/semantics/acceptedVersion Astorga Junquera, P. Mean reversion in long-horizon real exchange rates: evidence from Latin America. J Int Money Finan. 2012 Oct;31(6):1529-50. DOI: 10.1016/j.jimonfin.2012.02.014 0261-5606 http://hdl.handle.net/10230/42369 http://dx.doi.org/10.1016/j.jimonfin.2012.02.014 eng Journal of International Money and Finance. 2012 Oct;31(6):1529-50 © Elsevier https://doi.org/10.1016/j.jimonfin.2012.02.014 info:eu-repo/semantics/openAccess application/pdf application/pdf Elsevier