This paper investigates the role of country specific and global factors, particularly oil price, on the real exchange rate (RER) in selected Commonwealth of Independent States (CIS) countries (Azerbaijan, Kazakhstan, Kyrgyzstan, Moldova, Russia, Turkmenistan, Ukraine, and Uzbekistan) over the period from 2000 to 2011. The group of higher income, lower income, oil and gas exporter, and non- oil and gas exporter countries are further analyzed separately to induce homogeneity. The analysis is based on panel smooth transition autoregressive (PSTR) model, which takes into account the nonlinear dynamic adjustment of the real exchange rate towards equilibrium. The estimation results show strong nonlinear dynamic adjustment for the real exchange rate. Upon obtaining strong evidence on nonlinear dynamic behavior, which is modeled using a smooth transition autoregressive model with two regimes, we test the impact of global and country specific drivers on the real exchange rate. As an extension, panel smooth transition error correction model is estimated. Results show that there exists an asymmetric behavior of the real exchange rate when facing an over- or undervaluation of the domestic currency. The evidence also shows that oil price has significant impact for the appreciation of domestic currencies, particularly in oil and gas exporting relatively richer countries, and the CIS countries have become vulnerable to global shocks.
Empirical Research on Repo Rates Based on Exponenti- al Smooth Transition Autoregressive Model
