| Abstract: |
Quantile autoregression is used to explore asymmetries in the adjustment
process of pair wise real exchange rate between the Italian lire, French
franc, Deutsch mark, and the British pound. Based on the best specification
for each quantile we construct predicted conditional density functions which
guided us to identify two sources of asymmetry: 1) dispersion depends on the
conditioned value of the real exchange rate, i.e., “conditional”
heterokedasticity; 2) the probability of increases and falls also changes
according to the conditioned value, i.e., there is higher probability for the
real exchange rate to appreciate (depreciate) given the currency is
depreciated (appreciated).We only verified strong heterokedasticity in
relations among the lire, franc, and mark, which was resolved by estimating
quadratic autoregressive model for some quantiles. Relations involving the
pound presented stable but higher dispersion indicating larger probability of
wider oscillation. |