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Depreciated State Probabilities Histogram

10000 9000 8000

# of Observations

7000 6000 5000 4000 Total Number of Observations: 32,343 3000 2000 1000 0

: M2,LW

0

0.1

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1&;131 H ;

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Government Consumption Coefficient Correlation PWT56 x PWT60 1 0.9 Ghana

0.8

Canada

0.7

Haiti

Nigeria

Cameroon

Pakistan

0.6

Ecuador Morocco Nepal

0.5 0.4

Togo Trinidad and Tobago Sierra Leone

Congo, Rep.

0.3

Burundi

0.2 0.1 0

Openness Coefficient Correlation PWT56 x PWT60 1 0.9 0.8

Cameroon

Haiti

Bolivia

0.7 0.6

Paraguay

Congo, Rep. Argentina

Sierra Leone Algeria

0.5 0.4 0.3 Congo, Dem. Rep. 0.2 0.1 0

1M

Tunisia

:

/// Terms of Trade

Austria Belgium Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdon Argentina Bolivia Brazil Canada Chile

Cointegrating Vectors

(0.256) 0.105 (0.866) 0.099 (0.038) 0.120 (1.109) 0.124 (0.287) 0.068 (0.373) 0.064 (0.018) 0.059 0.139 0.031 0.210 0.047 0.526 0.082 0.280 0.021 (0.062) 0.053 (0.030) 0.029 0.110 0.143 (0.077) 0.160 (1.335) 0.092 (0.378) 0.042 0.171 0.087 0.318 0.030 (0.192) 0.044 0.228 0.017

Colombia Costa Rica Ecuador El Salvador Guatemala Haiti Honduras Jamaica Mexico Paraguay

(0.707) 0.031 (0.379) 0.063 (0.199) 0.047 0.066 0.059 (0.453) 0.104 (0.643) 0.082

Government (0.089) 0.078 0.394 0.042 (0.060) 0.105 0.570 0.072 0.611 0.130

0.667 0.109

0.896 0.073 0.551 0.028 (1.901) 0.102 0.756 0.052 0.750 0.054 (0.053) 0.098 0.129 0.126 0.967 0.096

2.006 0.378 3.890 0.469 0.341 0.028 0.924 0.091 2.688 0.143 0.441 0.031 0.473 0.143 0.318 0.109 0.588 0.067

1.177 0.068 0.850 0.034 (0.228) 0.053 0.259 0.055

Openess

Interest Rate

(1.527) 0.313 (0.902) 0.151 (1.557) 0.165 (4.337) 0.438

(0.631) 0.058 (1.388) 0.105 0.206 0.127 (3.517) 0.170

0.395 0.583 (1.084) 0.329 (1.670) 0.115 5.430 0.503 2.636 0.123 (3.093) 0.234 4.980 0.347 (0.249) 0.179

(1.299) 0.159 (1.009) 0.083 (0.027) 0.107 0.074 0.124 (0.201) 0.057 0.387 0.129 0.196 0.128 (1.201) 0.121 (0.062) 0.241 (0.904) 0.168 (0.894) 0.096 (1.428) 0.252 2.230 0.644 3.164 0.393 0.754 0.087

(3.598) 1.158 2.512 0.238 (0.911) 0.265 (7.855) 0.625 2.614 0.307 (0.478) 0.245 (0.869) 0.114 0.417 0.212 (2.026) 0.360

1.591 0.522 (0.596) 0.327 (2.668) 0.537 0.178 0.134 2.747 0.344 1.438 0.260

Trend

(0.100) 0.006

0.068 0.008 (0.089) 0.005

0.001 0.006

(0.324) 0.012

(0.033) 0.014 0.022 0.005

(0.031) 0.009 (0.966) 0.143 0.166 0.216 2.782 0.306 (3.964) 0.315 (1.133) 0.232 (0.235) 0.275 (1.549) 0.392 (2.768) 0.302

(1.107) 0.287

12

(0.151) 0.005

(0.084) 0.011

Constant 162.179 20.825 189.043 11.968 147.000 20.607 277.086 17.608 131.655 10.606 144.219 11.856 89.059 8.151 119.323 3.221 (29.618) 13.818 (43.658) 11.317 270.035 6.810 46.595 8.376 92.722 3.160 101.974 20.981 147.521 16.636 125.227 14.208 121.991 5.852 121.894 24.604 (54.253) 16.635 108.774 5.230 43.498 5.553 (2.943) 3.264 104.405 8.013 120.952 10.225 148.699 4.937 59.713 12.320 167.642 7.329 160.407 16.763 70.379 4.858 62.977 3.896 56.533 5.284

Cointegrating Vectors

Terms of Trade Peru Trinidad Tobago

2.260 0.193 (0.211) 0.021

United States Uruguay Venezuela Australia Indonesia New Zealand Papua New Guinea

0.399 0.084 0.116 0.031 (0.667) 0.044 0.330 0.058 (1.110) 0.070 0.214 0.023

Bahrain Bangladesh Hong Kong India Israel Japan

(0.459) 0.094 (1.981) 0.408 0.503 0.132 0.645 0.122 (0.415) 0.045

Jordan Korea

(0.118) 0.127

Kuwait Malaysia

(0.203) 0.028

Government 8.450 0.548 0.433 0.040 4.443 0.337 (0.756) 0.264 1.202 0.089 1.474 0.139 0.647 0.209 (0.149) 0.113 0.011 0.055 0.124 0.025 0.553 0.200 (0.149) 0.033 6.339 0.342 0.467 0.040

0.581 0.017 0.421 0.079 (0.055) 0.049 0.326 0.006

Nepal Pakistan Philiphines

0.000 0.029 0.196 0.050

Saudi Arabia Singapore Sri Lanka Thailand Turkey

(5.534) 0.409 0.217 0.087 (0.076) 0.041 (0.353) 0.048

Algeria Burkina Faso Burundi Cameroon Central Africa Zaire Congo

0.055 0.089 (0.096) 0.017 0.484 0.074 0.111 0.024 0.332 0.068 (0.060) 0.008

1.827 0.130 (0.030) 0.030 (0.813) 0.081 0.042 0.016 (0.107) 0.086 0.434 0.048 0.484 0.108 0.994 0.059 0.880 0.290 1.406 0.148

0.690 0.098 0.662 0.118 0.489 0.026

Openess

Interest Rate

38.385 1.815

Trend

(0.000) 1.057 2.455 0.356

3.354 0.616 5.037 0.596 6.241 0.559 (3.351) 0.479 (1.407) 0.520 (8.539) 0.873

(0.078) 0.414 (2.328) 0.227 (0.794) 0.118 (4.669) 0.459

0.086 0.007 0.436 0.172 0.124 0.016 0.074 0.016

(3.580) 2.132 (1.824) 0.344 (0.101) 0.074 (5.383) 0.526 0.242 0.139 (1.594) 0.273 (0.010) 0.048 0.692 0.165 (2.928) 0.213 1.706 0.125 3.603 0.495 (0.595) 0.118 (0.536) 0.709 (10.215) 0.446 1.520 0.348 1.216 1.142 8.937 0.197 (2.782) 0.405 2.708 0.213 (2.422) 0.874 (1.813) 0.140 (1.438) 0.198 (0.018) 0.109

(2.580) 0.293

(1.017) 0.248 (1.875) 0.090 (3.105) 0.245 (0.076) 0.162 (0.101) 0.107 (1.474) 0.132 (1.698) 0.127 (0.260) 0.237 (2.328) 0.306 (0.491) 0.120 (1.085) 0.453 (1.927) 0.179 (1.055) 0.343 (0.695) 0.333 (2.388) 0.367 (2.786) 0.302 (0.660) 0.374 (1.572) 0.243 (4.906) 0.442 (1.083) 0.163

3N

(0.246) 0.010

(0.065) 0.007

0.244 0.004

0.247 0.019 0.137 0.015

Constant (794.825) 29.783 88.267 4.912 (43.647) 16.583 (31.912) 18.223 (82.124) 8.426 180.013 9.969 74.141 10.733 371.321 16.521 45.844 5.708 77.306 4.500 87.115 5.683 324.296 43.950 (0.046) 24.681 2.511 13.533 277.845 12.523 15.470 6.716 131.034 17.961 127.356 5.232 52.255 4.590 88.067 4.046 (5.293) 6.895 26.951 9.599 191.720 7.025 624.551 50.067 273.111 15.968 61.707 11.761 104.267 23.275 (122.775) 6.792 66.318 10.076 (42.223) 12.202 99.845 13.897 143.328 3.894 80.923 10.105 69.277 5.158

Cointegrating Vectors

Terms of Trade Egypt Ethiopia Gabon Ghana Kenya Liberia Madagascar

0.119 0.046 (0.125) 0.060 (0.035) 0.019 (0.205) 0.034 0.065 0.038 (0.049) 0.062 (0.292) 0.030

Malawi Morocco Niger Nigeria Senegal Sierra Leone

(0.433) 0.056 (0.237) 0.038 (0.840) 0.112 (0.664) 0.360

South Africa Sudan Togo

(0.102) 0.035

Tunisia Zimbabwe Rwanda Ivory Coast C.S.P C.S.P (GV) C.S.P.: Correct sign proportion Standard errors below coefficients.

0.115 0.079 (0.031) 0.012 0.60 0.56

Government 2.262 0.094 3.875 0.184 0.288 0.053 2.113 0.075 0.378 0.055 0.411 0.058 2.403 0.137 1.813 0.156 0.114 0.074 (0.726) 0.112 0.355 0.068 0.044 0.054 (0.526) 0.333 0.434 0.096 3.461 0.726 (0.563) 0.056 0.243 0.041 1.144 0.081 4.773 0.290 1.209 0.065 0.81 0.80

Openess

Interest Rate

(12.751) 0.710 (4.384) 0.214 (0.949) 0.415 0.101 0.372 (1.059) 0.163

(0.460) 0.194 (4.243) 0.248 (1.024) 0.152 7.144 0.717 0.396 0.298 (0.938) 0.181

(4.280) 0.281 (0.015) 0.381 (0.582) 0.124 (0.888) 0.512 0.318 0.688

0.302 0.589 (6.611) 0.365 11.779 2.972 3.113 0.161 (1.584) 0.906

Trend

0.084 0.012 0.004 0.007

0.161 0.009

0.097 0.003 0.316 0.013

0.152 0.006

(2.207) 0.177 (8.014) 1.959 (0.639) 0.350 (0.080) 0.004

1.164 0.247 5.971 0.622 (2.200) 0.279 0.58 0.58

(2.110) 0.416

(2.299) 0.266 0.82 0.63

3

Constant 174.381 8.093 109.363 9.140 90.600 6.101 31.752 9.149 75.200 3.809 97.235 9.998 (52.262) 16.324 (1.763) 12.472 69.382 2.770 84.161 4.367 78.618 3.566 269.341 12.421 96.645 48.323 12.679 7.149 235.321 24.831 160.030 4.845 105.233 3.476 29.301 9.990 (189.385) 23.234 80.454 4.906

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! Table 1 Estimation results summary Dependent variable: exchange rate misalignment

Countries

Austria Belgium (*) Denmark Finland France Germany Greece Ireland Italy Netherlands Norway Portugal Spain Sweden Switzerland United Kingdon Argentina Bolivia (*) Brazil Canada Chile Colombia Costa Rica Ecuador El Salvador Guatemala Haiti Honduras Jamaica

Mean µ(1) 2.470 15.60 0.958 0.71 (0.323) 11.59 9.747 54.12 0.959 11.71 0.581 13.23 1.877 4.17 0.287 10.00 6.201 14.81 3.006 11.81 2.306 9.62 1.267 11.31 2.956 16.15 5.659 17.31 2.322 8.23 5.507 12.91 44.264 15.43 4.405 0.48 11.714 14.03 1.223 9.31 6.436 25.57 2.784 26.74 18.223 18.39 8.877 14.84 15.805 15.30 165.401 26.92 21.538 15.24 73.347 19.27 12.037 11.98

Constant part of probability µ(2)

(∗)

(1.809) (3.20) (3.179) NaN (3.803) (1.42) (5.570) (1.34) (3.429) (2.26) (5.557) (1.15) (5.912) (2.79) (4.076) (2.47) (0.342) (0.24) (0.520) (0.60) (1.685) (0.96) (4.141) (2.75) (3.510) (2.88) (4.730) (0.73) (1.513) (0.40) (4.591) (2.28) (41.761) (1.47) (58.201) NaN (9.869) (1.66) (1.063) (0.70) (46.133) (2.71) (11.080) (2.87) (0.699) (0.29) (9.285) (1.66) (8.158) (1.24) 107.813 0.28 (4.040) (0.65) 18.275 0.64 (10.823) (1.78)

β(1) 3.794 8.82 4.784 7.95 4.297 9.33 4.177 5.54 3.968 8.87 5.415 10.41 5.323 5.19 3.827 9.89 1.253 2.19 0.543 0.80 3.536 7.15 4.117 9.29 3.643 8.29 4.260 6.80 3.906 7.63 4.346 6.73 5.733 4.79 4.630 6.36 3.113 7.76 2.877 5.89 5.256 7.10 4.824 8.20 (0.004) 4.204 5.64 4.537 5.53 5.907 4.60 2.368 3.28 5.702 4.16 4.446 5.07

β(2) 3.844 8.62 4.101 6.48 2.970 6.42 5.380 7.36 3.023 6.30 2.541 3.63 4.059 5.08 1.109 1.18 4.421 9.70 4.578 9.52 3.432 5.11 2.543 4.80 3.562 10.88 4.719 7.86 1.839 3.24 4.672 7.61 6.242 6.02 3.427 3.97 3.591 8.55 2.507 5.88 4.705 5.40 3.582 6.46 5.030 8.68 3.980 6.43 5.311 7.25 6.280 5.42 5.201 7.26 6.320 5.76 6.076 6.04

31

Autoregressive Factor

Standard Deviation σ(1) 0.898 38.91 0.621 30.49 1.040 14.23 1.531 32.02 1.009 27.67 1.050 46.07 1.116 24.92 1.064 25.98 1.105 29.39 0.750 29.58 1.038 24.77 1.319 27.91 1.401 28.42 1.350 30.61 1.179 24.57 1.653 30.25 5.758 33.41 6.367 20.95 4.883 27.82 0.800 18.74 3.507 30.32 1.255 30.63 2.388 30.27 2.430 21.71 2.513 25.40 2.186 30.83 3.302 27.03 2.924 32.09 1.875 26.66

σ(2)

(∗∗)

0.775 (3.28) 2.516 0.01 4.450 7.81

Maximum Likelihood Likelihood Function α Ratio Statistic Value (MSM) 0.904 43.04 217.56 57.12 0.979 60.28 38.83 NaN 0.985 30.12 189.76 97.01 0.985 91.98 450.59 NaN 0.968 36.84 288.94 83.10 0.992 43.75 269.86 NaN 0.959 53.05 305.73 56.45 0.969 44.36 318.14 83.20 0.963 68.36 302.43 73.67 0.959 42.25 116.54 66.23 0.969 25.04 273.94 75.39 0.956 31.55 391.60 66.99 0.928 39.06 440.72 40.35 0.990 25.46 401.68 NaN 0.984 11.24 343.43 94.91 0.958 44.08 495.76 66.77 0.990 68.35 993.49 NaN 0.951 64.06 537.93 49.87 0.959 51.59 1,035.08 68.56 0.975 (2.89) 209.94 89.83 0.990 161.47 838.13 NaN 0.985 152.31 371.05 NaN 0.953 105.48 662.18 66.54 0.972 35.15 351.89 57.86 0.983 81.87 682.60 NaN 1.001 197.05 606.59 NaN 0.973 70.69 659.86 72.98 1.007 118.47 742.37 NaN 0.980 143.93 626.84 89.15

Table 1 Estimation results summary Dependent variable: exchange rate misalignment Countries

Mexico Paraguay Peru Trinidad Tobago United States Uruguay Venezuela Australia Indonesia New Zealand Papua New Guinea Bahrain Bangladesh Hong Kong India Israel Japan Jordan Korea Kuwait Malaysia Nepal Pakistan Philiphines Saudi Arabia Singapore Sri Lanka Thailand Turkey Algeria Burkina Faso

Mean µ(1) 12.113 19.65 4.062 4.58 71.672 12.01 (5.817) 18.40 3.637 8.86 25.193 25.04 18.769 17.03 6.105 13.61 (2.054) 8.46 (8.938) 13.45 2.705 15.93 14.019 16.74 6.399 19.59 (27.934) 8.38 11.648 13.74 10.461 14.04 2.356 8.77 0.118 9.93 21.590 22.08 0.279 8.44 (2.424) 14.86 5.533 8.06 2.483 5.49 17.954 16.80 (1.620) 7.20 1.053 1.76 14.405 31.75 1.855 11.87 6.089 15.12 15.101 16.79 52.445 17.15

Constant part of probability µ(2)

(∗)

(12.716) (1.64) (3.224) (1.00) (5.004) (0.42) (20.030) (0.75) (1.323) (0.32) (13.363) (2.15) (6.563) (1.47) (0.583) (0.35) (10.752) (0.62) (22.249) (0.98) (2.337) (1.47) (1.004) (0.42) (13.191) NaN (36.302) (0.34) (2.301) (0.62) (1.953) (0.64) (3.281) (0.91) (3.984) (3.05) (4.661) (1.02) (4.823) (3.40) (6.082) (1.30) (1.116) (0.53) (0.579) (0.56) (2.129) (0.69) (6.499) (0.93) (1.488) (0.57) (10.407) (1.92) (3.704) (1.68) (12.509) (0.99) (11.900) (1.03) (0.162) (0.04)

β(1) 1.387 2.16 1.944 3.40 1.241 2.05 3.851 7.13 1.762 3.74 2.979 7.23 2.835 4.37 1.104 2.33 3.804 6.62 4.125 8.70 2.750 7.33 2.644 2.70 1.920 1.92 4.768 6.11 3.112 4.58 2.638 4.85 3.744 8.26 3.738 8.03 3.932 6.19 4.174 7.17 3.942 10.17 1.635 2.37 1.721 2.26 3.015 4.84 4.361 6.59 4.857 4.19 5.863 6.18 3.527 6.25 4.017 6.32 3.331 5.08 (13.027) (9.96)

β(2) 5.018 8.71 4.133 9.36 4.616 8.69 4.420 8.65 3.739 8.73 3.844 9.30 4.120 8.02 3.807 10.50 3.736 5.76 3.908 6.34 3.104 7.81 5.352 5.22 5.665 5.66 4.557 5.21 4.562 6.25 4.373 8.53 2.637 4.64 (0.177) (0.25) 4.726 7.96 2.097 3.17 2.758 6.19 3.878 7.79 2.903 3.83 4.631 9.18 1.653 2.20 4.173 2.59 5.083 6.21 3.565 5.98 4.103 7.70 4.432 7.54 5.994 5.95

33

Standard Deviation σ(1) 2.186 30.04 2.275 26.64 13.153 27.09 2.030 29.94 1.691 25.76 5.163 28.25 3.659 23.66 1.647 26.99 1.887 23.37 1.987 29.69 1.203 24.79 1.248 NaN 2.263 2.26 1.630 24.78 1.956 20.68 2.207 26.47 1.763 25.22 1.141 20.52 2.611 29.28 1.718 7.02 0.797 29.53 2.079 22.39 1.392 12.42 2.960 30.24 1.294 19.65 0.922 16.97 1.896 36.65 1.323 27.09 2.867 26.54 3.545 24.49 4.270 28.23

σ(2)

(∗∗)

18.050 4.84 8.957 5.61 1.139 (2.29) -

Autoregressive Factor

Maximum Likelihood Likelihood Function α Ratio Statistic Value (MSM) 0.980 280.97 655.58 NaN 0.964 159.17 732.51 73.05 0.947 65.00 1,266.30 58.86 0.995 39.06 600.28 NaN 0.981 25.46 530.27 NaN 0.958 11.24 913.19 65.42 0.946 44.08 558.71 40.81 0.953 42.77 497.70 62.54 0.994 34.26 433.99 NaN 0.994 90.83 576.75 NaN 0.956 30.20 276.90 57.61 0.963 4.57 164.51 50.23 0.761 (94.86) 541.51 0.76 0.997 5.80 334.50 96.88 0.964 49.99 283.22 50.93 0.962 55.26 513.87 65.91 0.976 12.56 509.50 89.55 0.938 16.90 172.04 40.33 0.972 119.86 649.22 85.15 0.935 18.12 175.59 38.81 0.990 39.77 176.30 NaN 0.941 0.40 384.44 45.96 0.894 (0.74) 218.98 27.52 0.954 36.79 772.61 69.89 0.987 (4.71) 191.50 88.81 0.952 (0.02) 86.28 37.79 0.986 50.24 531.93 NaN 0.964 27.04 402.56 62.52 0.987 54.24 588.11 92.16 0.981 69.19 553.17 75.05 0.945 99.15 791.53 58.18

Table 1 Estimation results summary Dependent variable: exchange rate misalignment Countries

Mean

Constant part of probability (∗)

Standard Deviation

µ(2) µ(1) β(1) β(2) σ(1) Burundi 4.724 (4.263) 3.177 3.450 2.802 18.30 (1.03) 10.16 17.20 56.51 Cameroon 53.602 1.324 (10.555) 5.913 3.435 21.22 0.20 (1.74) 5.95 27.26 Central Africa 0.161 (5.070) 3.422 4.039 (0.872) 14.34 (1.87) 7.09 7.78 NaN Zaire 29.988 (8.967) 4.225 4.107 3.613 21.01 (1.35) 6.96 7.92 20.74 Congo 46.880 (0.245) (15.706) 6.006 3.223 20.21 (0.16) (0.01) 6.13 29.72 Egypt 41.089 (10.911) 3.865 4.558 5.002 25.10 (1.38) 6.76 8.90 30.39 Ethiopia 30.214 (64.648) 5.428 6.161 3.866 24.39 (0.73) 3.81 5.51 28.03 Gabon 83.807 (12.333) 3.864 6.027 2.643 34.96 (0.63) 1.66 5.85 27.46 Ghana 7.116 (20.700) 3.770 4.330 3.320 22.15 (1.26) 7.09 8.35 29.36 Kenya 0.887 (11.593) 4.794 1.394 2.567 10.22 (6.05) 8.06 2.09 26.16 Liberia 2.942 (0.912) 2.351 3.221 1.473 4.20 (0.30) 2.18 4.63 10.24 Madagascar 26.861 (8.460) 3.864 5.293 2.848 21.20 (1.00) 4.45 7.42 28.93 Malawi 32.006 (13.097) 4.967 5.598 5.709 7.67 (1.06) 3.56 4.97 21.35 Morocco 1.304 (6.148) 4.136 5.217 1.001 14.86 (0.95) 6.41 7.20 30.66 Niger 65.839 (8.983) 1.883 5.895 4.710 74.79 (8.21) 1.94 5.90 8.62 Nigeria 29.865 (8.962) 4.246 5.472 4.054 (*) 1.29 NaN 0.02 6.97 34.78 Senegal 115.507 31.178 5.269 6.102 2.917 28.93 0.65 3.52 5.48 27.99 Sierra Leone 2.990 (46.582) 4.018 2.841 7.923 10.44 (6.49) 9.52 3.78 15.83 South Africa 16.720 0.092 1.286 4.730 1.922 25.61 0.05 1.99 11.43 31.29 Sudan 64.618 (6.699) 1.256 3.341 15.207 9.71 (0.44) 1.13 5.59 13.47 Togo 297.748 218.287 5.241 6.034 2.474 31.72 0.12 3.61 5.45 26.17 Tunisia 1.861 (0.907) 3.537 4.534 1.850 2.79 (0.95) 3.54 4.53 2.13 Zimbabwe 31.525 10.481 0.785 4.087 4.415 11.28 0.66 1.12 8.66 22.13 Rwanda 149.542 (1.526) 1.369 5.612 9.064 22.75 (0.25) 1.24 5.67 23.25 Ivory Coast 119.985 35.884 5.365 6.332 2.783 29.91 0.61 3.52 5.78 30.52 Asymptotic t-ratios below coefficients. (*) These are the t-ratios of the difference between the mean of the two regimes. (**) These are the t-ratios of the difference between the standard deviation of the two regimes.

3.

σ(2)

(∗∗)

1.894 (7.39) (1.190) (2.53) 7.067 8.24 2.179 2.40 -

Autoregressive Factor

Maximum Likelihood Likelihood Function α Ratio Statistic Value (MSM) 0.975 16.19 446.51 93.27 0.974 82.44 704.96 79.77 0.980 600.01 205.74 98.16 0.966 102.40 845.74 71.98 0.901 124.15 686.81 42.27 0.971 144.47 1,017.00 92.02 0.996 168.80 739.21 NaN 0.989 269.57 562.09 62.98 0.988 18.12 765.44 NaN 0.911 39.77 558.72 41.07 0.951 0.40 203.37 37.75 0.983 (0.74) 665.74 NaN 0.968 36.79 515.65 55.24 0.992 33.89 256.95 NaN 1.111 (0.02) 767.41 91.71 0.989 50.24 828.80 NaN 1.006 27.04 590.11 NaN 0.921 54.24 327.60 31.86 0.962 69.19 568.83 78.08 0.893 17.82 318.41 18.64 1.001 222.91 495.20 NaN 0.650 (47.06) 106.75 0.79 0.981 37.05 524.77 53.27 0.908 619.23 752.81 34.78 1.004 231.13 719.16 NaN

Table 2 Estimation results summary Dependent variable: exchange rate misalignment

Countries

Austria

Transition Probabilities p11 0.9780

p22 0.9790

Goldfajn e Valdes (1999) Methodology Number/Average Duration Depreciations Appreciations -

Belgium (*) Denmark

0.9917

0.9837

-

-

0.9866

0.9512

-

-

Finland

0.9849

0.9954

-

France

0.9814

0.9536

2 30 -

Germany

0.9956

0.9270

Greece

0.9951

0.9830

1 44 -

Ireland

0.9787

0.7519

-

Italy

0.7779

0.9881

Netherlands

0.6325

0.9898

-

-

Norway

0.9717

0.9687

-

-

Portugal

0.9840

0.9271

-

-

Spain

0.9745

0.9724

-

-

Sweden

0.9861

0.9912

Switzerland

0.9803

0.8629

1 112 -

United Kingdon

0.9872

0.9907

2 17 1 15 -

Argentina

0.9968

0.9981

Bolivia (*) Brazil

0.9903

0.9685

0.9574

0.9732

Canada

0.9467

0.9247

Chile

0.9948

0.9910

Colombia

0.9920

0.9729

Costa Rica

0.4990

0.9935

Ecuador

0.9853

0.9817

El Salvador

0.9894

0.9951

Guatemala

0.9973

0.9981

Haiti

0.9144

0.9945

Honduras

0.9967

0.9982

Jamaica

0.9884

0.9977

1 16 -

1 4

-

1 5 6 24 5 5 6 19 -

7 16 5 6 3 24 -

4 8 3 40 3 22 4 9 2 56 2 36 2 32 1 61 5 19

3 14 2 54 2 9 2 30 3 25 2 20 3 19 3 27 3 18

3L

Markov Switching Model Number/Average Duration Depreciations Appreciations 7 8 24 25 3 2 107 64 4 2 87 34 1 374 7 5 46 17 3 3 109 27 2 2 175 51 8 3 51 4 4 4 3 106 1 4 6 97 8 4 24 25 6 4 55 12 4 3 92 18 10 33 2 91 2 95 1 209 6 30 16 13 4 104 2 189 4 10 1 108 2 110 1 150 2 11 1 105 7 22

5 6 7 30 5 17 1 10 4 34 9 8 1 86 4 103 4 22 2 176 2 176 6 45

Table 2 Estimation results summary Dependent variable: exchange rate misalignment

Countries

Transition Probabilities

Mexico

p11 0.8001

p22 0.9934

Paraguay

0.8748

0.9842

Peru

0.7757

0.9902

Trinidad Tobago

0.9792

0.9881

United States

0.8535

0.9768

Uruguay

0.9516

0.9790

Venezuela

0.9445

0.9840

Australia

0.7511

0.9783

Indonesia

0.9782

0.9767

New Zealand

0.9841

0.9803

Papua New Guinea

0.9399

0.9571

Bahrain

0.9336

0.9953

Bangladesh

0.8721

0.9965

Hong Kong

0.9916

0.9896

India

0.9574

0.9897

Israel

0.9333

0.9875

Japan

0.9769

0.9332

Jordan

0.9768

0.4559

Korea

0.9808

0.9912

Kuwait

0.9848

0.8906

Malaysia

0.9810

0.9403

Nepal

0.8369

0.9797

Pakistan

0.8482

0.9480

Philiphines

0.9533

0.9903

Saudi Arabia

0.9874

0.8392

Singapore

0.9923

0.9848

Sri Lanka

0.9972

0.9938

Thailand

0.9714

0.9725

Turkey

0.9823

0.9837

Algeria

0.9655

0.9883

Burkina Faso

0.0000

0.9975

Goldfajn e Valdes (1999) Methodology Number/Average Duration Depreciations Appreciations 5 3 23 20 6 6 15 17 9 7 12 13 2 3 58 15 3 2 14 29 11 5 12 22 5 4 8 7 1 23 1 3 113 42 1 2 11 22 1 9 1 17 1 2 10 11 2 2 31 39 1 14 2 2 19 10 4 2 8 15 3 19 -

1 11 -

1 14 2 9 -

1 5 4 8 -

4 19 1 19 -

1 32 1 21 -

3 64 2 22 3 35 2 17 5 18

2 80 -

30

5 11 1 7 3 15

Markov Switching Model Number/Average Duration Depreciations Appreciations 5 7 12 55 5 9 3 43 3 5 14 66 2 1 129 113 5 11 5 33 5 5 38 36 4 1 38 123 8 8 4 46 1 205 3 5 65 30 5 7 24 16 1 197 1 1 267 22 1 1 192 115 1 1 55 168 5 4 19 60 9 6 27 12 9 2 22 2 2 1 193 18 4 2 45 13 4 4 87 14 3 8 9 25 3 15 2 8 2 2 106 108 2 1 105 13 5 16 1 241 4 8 48 15 4 46 2 2 44 96 1 1 3 396

Table 2 Estimation results summary Dependent variable: exchange rate misalignment

Countries

Transition Probabilities

Burundi

p11 0.9600

p22 0.9692

Cameroon

0.0000

0.9973

Central Africa

0.9684

0.9827

Zaire

0.9856

0.9838

Congo

0.0000

0.9975

Egypt

0.9795

0.9896

Ethiopia

0.9956

0.9979

Gabon

0.9795

0.9976

Ghana

0.9775

0.9870

Kenya

0.9918

0.8012

Liberia

0.9130

0.9616

Madagascar

0.9795

0.9950

Malawi

0.9931

0.9963

Morocco

0.9843

0.9946

Niger

0.8680

0.9973

Nigeria (*) Senegal

0.9859

0.9958

0.9949

0.9978

Sierra Leone

0.9823

0.9448

South Africa

0.7835

0.9913

Sudan

0.7784

0.9658

Togo

0.9947

0.9976

Tunisia

0.9717

0.9894

Zimbabwe

0.6868

0.9835

Rwanda

0.7972

0.9964

Ivory Coast

0.9953

0.9982

Goldfajn e Valdes (1999) Methodology Number/Average Duration Depreciations Appreciations 4 4 5 16 1 1 60 77 2 13 10 5 20 18 2 1 11 3 5 2 38 62 3 2 28 40 2 2 12 27 9 7 12 17 3 3 5 5 3 34 4 8 1 94 4 25 2 76 2 19 4 10 4 6 4 7 1 60 -

4 37 4 8 1 10 2 58 4 36 1 27 3 14 1 14 3 5 4 15 -

3 8 5 14 4 16

2 12 5 20 2 10

Average episode duration below number of episodes

3M

Markov Switching Model Number/Average Duration Depreciations Appreciations 5 5 30 20 1 1 4 364 3 4 40 53 4 4 55 38 1 1 2 401 1 239 1 4 74 22 1 5 2 3 118 54 3 1 119 6 3 6 3 14 1 137 1 5 50 26 1 6 141 50 1 59 2 2 48 176 1 59 1 1 96 21 4 4 4 109 4 2 10 18 1 2 59 103 1 2 21 43 4 3 2 78 1 1 4 268 1 2 59 191

:

/

!

!

K

! 0.1

RER Normalized Misalignment -Austria

1

Filtered Probability (Deprec)-Austria

0.05 0

0.5

-0.05 -0.1 1960 1

1970 1980 1990 Apprec. Episodes (G&V) -Austria

0 1960 1

0.5

0.5

0

0

-0.5

1970 1980 1990 Deprec. Episodes (G&V) -Austria

-0.5

-1 1960 1

1970 1980 1990 Apprec Episodes (MSM) -Austria

0.5

-1 1960 1

1970 1980 1990 Deprec. Episodes (MSM) -Austria

0.5

0 1960

1970

1980

1990

RER Normalized Misalignment -Belgium

0 1960

1

1970

1980

1990

Filtered Probability (Deprec)-Belgium

0.05 0

0.5

-0.05 -0.1 -0.15 1960 1

1970 1980 1990 Apprec. Episodes (G&V) -Belgium

0 1960 1

0.5

0.5

0

0

-0.5 -1 1960 1

-0.5 1970 1980 1990 Apprec Episodes (MSM) -Belgium

0.5

0 1960

1970 1980 1990 Deprec. Episodes (G&V) -Belgium

-1 1960 1

1970 1980 1990 Deprec. Episodes (MSM) -Belgium

0.5

1970

1980

1990

0 1960

32

1970

1980

1990

0.2

RER Normalized Misalignment -Denmark

1

Filtered Probability (Deprec)-Denmark

0.1 0

0.5

-0.1 -0.2 1960 1

1970 1980 1990 Apprec. Episodes (G&V) -Denmark

0 1960 1

0.5

0.5

0

0

-0.5

1970 1980 1990 Deprec. Episodes (G&V) -Denmark

-0.5

-1 1960 1

1970 1980 1990 Apprec Episodes (MSM) -Denmark

0.5

-1 1960 1

1970 1980 1990 Deprec. Episodes (MSM) -Denmark

0.5

0 1960

1970

1980

1990

RER Normalized Misalignment -Finland

0 1960

1

1970

1980

1990

Filtered Probability (Deprec)-Finland

0.2 0.1

0.5

0 -0.1 -0.2 1960 1

1970 1980 1990 Apprec. Episodes (G&V) -Finland

0 1960 1

1970 1980 1990 Deprec. Episodes (G&V) -Finland

0.5 0

0.5

-0.5 -1 1960 1

1970 1980 1990 Apprec Episodes (MSM) -Finland

0.5

0 1960

0 1960 1

1970 1980 1990 Deprec. Episodes (MSM) -Finland

0.5

1970

1980

1990

0 1960

.N

1970

1980

1990

0.2

RER Normalized Misalignment -France

1

Filtered Probability (Deprec)-France

0.1 0

0.5

-0.1 -0.2 1960 1

0 1960

1970 1980 1990 Apprec. Episodes (G&V) -France

1

0.5

0.5

0

0

-0.5

-0.5

-1 1960 1

1970 1980 1990 Apprec Episodes (MSM) -France

0.5

-1 1960 1

1970 1980 1990 Deprec. Episodes (MSM) -France

0.5

0 1960

0.2

1970 1980 1990 Deprec. Episodes (G&V) -France

1970

1980

0 1960

1990

RER Normalized Misalignment -Germany

1

1970

1980

1990

Filtered Probability (Deprec)-Germany

0.1 0

0.5

-0.1 -0.2 1960 1

0 1960

1970 1980 1990 Apprec. Episodes (G&V) -Germany

1

1970 1980 1990 Deprec. Episodes (G&V) -Germany

0.5 0

0.5

-0.5 -1 1960 1

0.5

0 1960

0 1960

1970 1980 1990 Apprec Episodes (MSM) -Germany

1

1970 1980 1990 Deprec. Episodes (MSM) -Germany

0.5

1970

1980

0 1960

1990

.

1970

1980

1990

0.2

RER Normalized Misalignment -Greece

1

Filtered Probability (Deprec)-Greece

0.1 0

0.5

-0.1 -0.2 1960 1

1970 1980 1990 Apprec. Episodes (G&V) -Greece

0 1960 1

1970 1980 1990 Deprec. Episodes (G&V) -Greece

0.5 0.5

0 -0.5

0 1960 1

1970 1980 1990 Apprec Episodes (MSM) -Greece

0.5

-1 1960 1

1970 1980 1990 Deprec. Episodes (MSM) -Greece

0.5

0 1960

1970

1980

1990

RER Normalized Misalignment -Ireland

0 1960

1

1970

1980

1990

Filtered Probability (Deprec)-Ireland

0.05 0

0.5

-0.05 -0.1 -0.15 1960 1

1970 1980 1990 Apprec. Episodes (G&V) -Ireland

0 1960 1

0.5

0.5

0

0

-0.5 -1 1960 1

-0.5 1970 1980 1990 Apprec Episodes (MSM) -Ireland

0.5

0 1960

1970 1980 1990 Deprec. Episodes (G&V) -Ireland

-1 1960 1

1970 1980 1990 Deprec. Episodes (MSM) -Ireland

0.5

1970

1980

1990

0 1960

.&

1970

1980

1990