A nonparametric study of real exchange rate persistence over a century

•This paper estimates the degree of persistence of long‐horizon real exchange rates.•We use nonparametric operational algorithms for general nonlinear models.•Our estimations are based on SMM and SMD properties.•We report substantially shorter maximum half‐life (MHL) estimates than those from linear models.•Our results are robust to the choice of bandwidth for kernel estimators.

This paper estimates the degree of persistence of 16 long-horizon real exchange rates relative to the US dollar. We use nonparametric operational algorithms by El-Gamal and Ryu (2006) for general nonlinear models based on two statistical notions: the short memory in mean (SMM) and the short memory in distribution (SMD). We found substantially shorter maximum half-life (MHL) estimates than the counterpart from linear models. Our results are robust to the choice of bandwidth with a few exceptions.