Holmes, M. & Bano, S. (2008). On openness and real exchange rate volatility. Economics Bulletin, 6(14), 1-12.
Permanent Research Commons link: http://hdl.handle.net/10289/1983
We address the puzzle concerning the inverse relationship between openness and real exchange rate volatility. We argue that the relationship can be explained by increased openness facilitating purchasing power parity. Using New Zealand data, we show that increased openness prolongs real exchange regimes characterised by fast mean-reversion and low volatility.
This article has been published in the journal: Economics Bulletin.
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