Abstract
Threshold-type nonlinear relations are pretty popular in modelling the deviations from purchasing power parity. This article shows that there is a close relation between the nonlinear band Threshold Autoregressive (TAR) models studied by Obstfeld and Taylor (1997) and Stochastic Unit Root (STUR) processes discussed by Granger and Swanson (1997) and McCabe and Tremayne (1995). Employing the real exchange rates from four major countries against the US dollar, this article finds little evidence for TAR but some support for STUR during the post-Bretton Woods sample periods.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
