Dynamics of the Real Exchange Rate in European Emerging Economies: Evidence from Quantile Regression

  • Zorica Mladenović University of Belgrade, Faculty of Economics, Serbia
  • Slađana Srdić University of Novi Sad, Faculty of Economics Subotica, Department of European and International Economics and Business, Serbia

Abstract

The sustainability of purchasing power parity (PPP) theory is examined within the quantile autoregression model for the monthly data of the euro- and the US dollar-based real exchange rate (RER) in selected European economies (the Czech Republic, Hungary, Poland, Romania, Serbia and Turkey). Period from January 2000 to December 2014 is covered. The application of quantile autoregression model is motivated by the necessity of identifying asymmetric behavior of the RER due to the shocks of different size and sign. The empirical results support to some extent the PPP theory for the euro- and US dollar-based RER in Romania, Serbia, and Turkey. The euro-based RER in Hungary and Poland is also identified to confirm the PPP theory. The dynamics of the RER in the Czech Republic cannot be associated with the PPP validity. The persistence of the euro-based RER is estimated to be more prominent after the depreciation shocks of smaller size.


Key words: Purchasing power parity, Real exchange rate, Quantile regression model.
JEL: C22, F31, F41.


 

How to Cite
Mladenović Z., & Srdić S. (2018). Dynamics of the Real Exchange Rate in European Emerging Economies: Evidence from Quantile Regression. Panoeconomicus, Advance online publication. doi:10.2298/PAN170125024M
Section
Original scientific paper