Document Type
Article
Abstract
We assess the robust macro determinants of the real exchange rate in Mauritius under model uncertainty by utilizing Bayesian Model Averaging (BMA). We introduce a broader range of potential macro determinants of the real exchange rate in Mauritius. Then we tackle the issue of model uncertainty when identifying these macro determinants of the real exchange rate by exploring the impact of different priors on the model size, and different priors on model coefficients on the posterior estimates. We identify the real money supply, and the real productivity to be the robust macro determinants of the real exchange rate in Mauritius. Their coefficient signs are also theoretically consistent. The real money supply impact on the real exchange rate negatively, whereas the real productivity impact on it positively. Our results remain robust to different priors on the model size, and to different priors on model coefficients.
Recommended Citation
Njindan Iyke, Bernard
(2018)
"MACRO DETERMINANTS OF THE REAL EXCHANGE RATE IN A SMALL OPEN SMALL ISLAND ECONOMY: EVIDENCE FROM MAURITIUS VIA BMA,"
Bulletin of Monetary Economics and Banking: Vol. 21:
No.
1, Article 5.
DOI: https://doi.org/10.21098/bemp.v21i1.922
Available at:
https://bulletin.bmeb-bi.org/bmeb/vol21/iss1/5
First Page
57
Last Page
80
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Country
Australia
Affiliation
Deakin University
