Three-Regime Asymmetric STAR Modeling and Exchange Rate Reversion
AbstractThe breakdown of the Bretton Woods system and the adoption of generalized floating exchange rates ushered in a new era of exchange rate volatility and uncertainty. This increased volatility leads economists to search for economic models able to describe observed exchange rate behavior. In the present paper, we propose more general STAR transition functions that encompass both threshold nonlinearity and asymmetric effects. Our framework allows for a gradual adjustment from one regime to another and considers threshold effects by encompassing other existing models, such as TAR models. We apply our methodology to three different exchange rate data sets: one for developing countries and official nominal exchange rates, the second for emerging market economies using black market exchange rates, and the third for OECD economies. Copyright (c) 2010 The Ohio State University.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 42 (2010)
Issue (Month): 7 (October)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joon Y. Park & Mototsugu Shintani, 2005.
"Testing for a Unit Root against Transitional Autoregressive Models,"
Vanderbilt University Department of Economics Working Papers
05010, Vanderbilt University Department of Economics.
- Joon Y. Park & Mototsugu Shintani, 2006. "Testing for a Unit Root against Transitional Autoregressive Models," Levine's Bibliography 321307000000000316, UCLA Department of Economics.
- Sollis, Robert & Leybourne, Stephen & Newbold, Paul, 2002. "Tests for Symmetric and Asymmetric Nonlinear Mean Reversion in Real Exchange Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(3), pages 686-700, August.
- n/a, 2001. "Balance of payments prospects in EMU," NIESR Discussion Papers 164, National Institute of Economic and Social Research.
- Sarno, Lucio & Taylor, Mark P. & Chowdhury, Ibrahim, 2004.
"Nonlinear dynamics in deviations from the law of one price: a broad-based empirical study,"
Journal of International Money and Finance,
Elsevier, vol. 23(1), pages 1-25, February.
- Chowdhury, Ibrahim & Sarno, Lucio & Taylor, Mark P, 2002. "Non-Linear Dynamics in Deviations from the Law of One Price: A Broad-Based Empirical Study," CEPR Discussion Papers 3377, C.E.P.R. Discussion Papers.
- Jayasri Dutta, 2002. "Dread of Depreciation," IMF Working Papers 02/63, International Monetary Fund.
- Mehmet Caner & Bruce E. Hansen, 2001.
"Threshold Autoregression with a Unit Root,"
Econometric Society, vol. 69(6), pages 1555-1596, November.
- Berka, Martin, 2005. "General Equilibrium Model of Arbitrage Trade and Real Exchange Rate Persistence," MPRA Paper 234, University Library of Munich, Germany.
- Chi-Young Choi & Young-Kyu Moh, 2007. "How useful are tests for unit-root in distinguishing unit-root processes from stationary but non-linear processes?," Econometrics Journal, Royal Economic Society, vol. 10(1), pages 82-112, 03.
- Taylor, Mark P & Peel, David A & Sarno, Lucio, 2001.
"Nonlinear Mean-Reversion in Real Exchange Rates: Toward a Solution to the Purchasing Power Parity Puzzles,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 1015-42, November.
- Peel, David & Sarno, Lucio & Taylor, Mark P, 2001. "Nonlinear Mean-Reversion in Real Exchange Rates: Towards a Solution to the Purchasing Power Parity Puzzles," CEPR Discussion Papers 2658, C.E.P.R. Discussion Papers.
- Maurice Obstfeld and Alan M. Taylor., 1997.
"Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited,"
Center for International and Development Economics Research (CIDER) Working Papers
C97-088, University of California at Berkeley.
- Obstfeld, Maurice & Taylor, Alan M., 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," Journal of the Japanese and International Economies, Elsevier, vol. 11(4), pages 441-479, December.
- Obstfeld, Maurice & Taylor, Alan M, 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," CEPR Discussion Papers 1672, C.E.P.R. Discussion Papers.
- Maurice Obstfeld & Alan M. Taylor, 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," NBER Working Papers 6053, National Bureau of Economic Research, Inc.
- Robert B. Davies, 2002. "Hypothesis testing when a nuisance parameter is present only under the alternative: Linear model case," Biometrika, Biometrika Trust, vol. 89(2), pages 484-489, June.
- Mario Cerrato & Hyunsok Kim & Ronald MacDonald, 2009.
"Technical Appendix-3-Regime asymmetric STAR modeling and exchange rate reversion,"
2009_26, Business School - Economics, University of Glasgow.
- Cerrato, Mario & Kim, Hyunsok & MacDonald, Ronald, 2009. "Technical Appendix-3-Regime asymmetric STAR modeling and exchange rate reversion," SIRE Discussion Papers 2009-37, Scottish Institute for Research in Economics (SIRE).
- Carmen M. Reinhart & Kenneth S. Rogoff, 2002.
"The Modern History of Exchange Rate Arrangements: A Reinterpretation,"
NBER Working Papers
8963, National Bureau of Economic Research, Inc.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 1-48, February.
- Reinhart, Carmen & Rogoff, Kenneth, 2004. "The modern history of exchange rate arrangements: A reinterpretation," MPRA Paper 14070, University Library of Munich, Germany.
- David I. Harvey & Stephen J. Leybourne, 2007. "Testing for time series linearity," Econometrics Journal, Royal Economic Society, vol. 10(1), pages 149-165, 03.
- Mario Cerrato & Nicholas Sarantis, 2007. "Does purchasing power parity hold in emerging markets? Evidence from a panel of black market exchange rates," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(4), pages 427-444.
- Kapetanios, George & Shin, Yongcheol & Snell, Andy, 2003. "Testing for a unit root in the nonlinear STAR framework," Journal of Econometrics, Elsevier, vol. 112(2), pages 359-379, February.
- Dumas, Bernard, 1992. "Dynamic Equilibrium and the Real Exchange Rate in a Spatially Separated World," Review of Financial Studies, Society for Financial Studies, vol. 5(2), pages 153-80.
- Aloy, Marcel & Boutahar, Mohamed & Gente, Karine & Péguin-Feissolle, Anne, 2011.
"Purchasing power parity and the long memory properties of real exchange rates: Does one size fit all?,"
Elsevier, vol. 28(3), pages 1279-1290, May.
- Marcel Aloy & Mohamed Boutahar & Karine Gente & Anne Peguin-Feissolle, 2011. "Purchasing power parity and the long memory properties of real exchange rates: does one size fit all?," Working Papers halshs-00559170, HAL.
- Chen, Shyh-Wei, 2014. "Smooth transition, non-linearity and current account sustainability: Evidence from the European countries," Economic Modelling, Elsevier, vol. 38(C), pages 541-554.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.