Nonlinear PPP Deviations: A Monte Carlo Investigation of Their Unconditional Half-Life
AbstractRecent research has generated support of the notion that the real exchange rate adjustment is nonlinear and that the PPP half-life is faster than the puzzling 3 to 5 years based on linear models. While different nonlinear models survive the specification tests against linear ones, there is little consensus on which specific threshold-type model outperforms the others in the family. In this paper, a Monte Carlo study is designed to address the issue and the findings support that the MR-LSTAR process is the most likely suspect that generates the puzzle.
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Bibliographic InfoArticle provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.
Volume (Year): 12 (2008)
Issue (Month): 4 (December)
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Web page: http://www.degruyter.com
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- Mark J. Holmes & JesÃºs Otero & Theodore Panagiotidis, 2011.
"PPP in OECD Countries: An Analysis of Real Exchange Rate Stationarity, Cross-sectional Dependency and Structural Breaks,"
KoÃ§ University-TUSIAD Economic Research Forum Working Papers, Koc University-TUSIAD Economic Research Forum
1135, Koc University-TUSIAD Economic Research Forum.
- Mark Holmes & JesÃºs Otero & Theodore Panagiotidis, 2012. "PPP in OECD Countries: An Analysis of Real Exchange Rate Stationarity, Cross-Sectional Dependency and Structural Breaks," Open Economies Review, Springer, Springer, vol. 23(5), pages 767-783, November.
- Mark J. Holmes & Jesus Otero & Theodore Panagiotidis, 2011. "PPP in OECD countries: An analysis of real exchange rate stationarity, cross-sectional dependency and strucutral breaks," Discussion Paper Series 2011_17, Department of Economics, University of Macedonia, revised Nov 2011.
- Mark J. Holmes & JesÃºs Otero & Theodore Panagiotidis, 2011. "PPP in OECD Countries: An Analysis of Real Exchange Rate Stationarity, cross-Sectional Dependency and Structural Breaks," Working Paper Series, The Rimini Centre for Economic Analysis 51_11, The Rimini Centre for Economic Analysis.
- Woo, Kai-Yin & Lee, Shu-Kam & Chan, Alan, 2014. "Non-linear adjustments to intranational PPP," Journal of Macroeconomics, Elsevier, Elsevier, vol. 40(C), pages 360-371.
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