The real exchange rate in Colombia: An analysis using multivariate cointegration

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Abstract

Johansen's analysis of cointegrated systems is used to build a model of the Colombian real exchange rate (RER). One cointegrating vector is found, which can be thought of as a long-run RER equation. The deviations of the RER from its long-run equilibrium relationship, after correcting for short-run dynamics, are interpreted as a measure of RER misalignment. The simulation performance of the model during the period of estimation and three years into the future is particularly good, with the simulated RER reproducing the long-run behaviour of the actual series.

Original languageEnglish (US)
Pages (from-to)661-671
Number of pages11
JournalApplied Economics
Volume31
Issue number5
DOIs
StatePublished - May 1999
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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