Electronic Resource
Cambridge, Mass.
:
Berkeley Electronic Press (now: De Gruyter)
Studies in nonlinear dynamics and econometrics
9.2005, 4, art2
ISSN:
1081-1826
Source:
Berkeley Electronic Press Academic Journals
Topics:
Mathematics
,
Economics
Notes:
We analyze the post-float real exchange rates for a group of OECD countries using the newly developed threshold test and tests for unit roots against stationary but nonlinear alternative by Caner and Hansen ( 2001). These tools help us disentangle the nonlinearity from the nonstationarity rigorously for the first time in the literature. After applying the threshold test and unit root tests: we find evidence for non-linearity of exchange rates. Specifically real exchange rates behave like a unit root in a band and when the depreciation or appreciation of the currency against $US exceeds the boundaries of the band , the real exchange rates are mean-reverting. The threshold value is treated as unknown and estimated in the model.
Type of Medium:
Electronic Resource
URL:
http://www.bepress.com/snde/vol9/iss4/art2
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