Real Exchange Rate Misalignment: Prelude to Crisis?

Table 4: Russia: Johansen cointegration test; with linear deterministic trend and lag interval (in
first differences) 1 to 2

Unrestricted Cointegration Rank Tests

Hypothesized No. of CE’s	Eigen-value	Trace Statistic	5 Percent Critical Value	1 percent Critical Value
None	0.524723	122.95190	87.31	96.58
At most 1	0.371151	62.69944	62.99	70.05
At most 2	0.139696	25.12649	42.44	48.45
At most 3	0.100898	12.93849	25.32	30.45
At most 4	0.051976	4.32339	12.25	16.26

Hypothesized No. of CE’s	Eigen-value	Max-Eigen Statistic	5 Percent Critical Value	1 percent Critical Value
None	0.524723	60.25245	37.52	42.36
At most 1	0.371151	37.57296	31.46	36.65
At most 2	0.139696	12.18800	25.54	30.34
At most 3	0.100898	8.61509	18.96	23.65
At most 4	0.051976	4.32339	12.25	16.26

In Tables 5 and 6, the estimated cointegrating equations for the logarithm of real exchange
rate for Poland and Russia are presented. The t-statistics are in parentheses. Specification 1 in
each table is the initial specification. In order to correct for possible serial correlation and
simultaneity bias the equations are re-specified with DOLS. Specification 2 is the final result. To
confirm that the vector of the estimated coefficients is a cointegrating vector, ADF and Phillips-
Perron unit root tests are conducted on the residual series. The relevant critical values are
obtained from Philips and Ouliaris (1990, Table IIc). The tests strongly reject the null hypothesis

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