Real exchange rates adjust faster than expected, challenging traditional economic theories.
Real exchange rates can fluctuate unpredictably, but our study shows that they actually tend to revert back to a certain level over time. By using advanced mathematical models, we found that these adjustments happen faster than previously thought. This challenges the idea that exchange rates always stay at the same level in the long run. Our simulations suggest that traditional tests may not always detect these patterns, but more complex tests can.