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Modelling the misalignments of the Dollar-Sterling real exchange rate: A nonlinear cointegration perspective

  • Valerie Mignon

    ()

    (University of Paris 10, THEMA-CNRS)

  • Gilles Dufrenot

    ()

    (University of Paris 12, ERUDITE, and GREQAM)

  • Slim Chaouachi

    ()

    (University of Paris 12)

This paper proposes a comparison of three nonlinear error-correction models to account for the asymmetric and slow adjustment dynamics of the Dollar-Sterling real exchange rate over a long period (1957-2002). We conclude that two NEC models adequately describe the nonlinear mean-reverting mechanism: smooth transition and rational polynomial NEC models.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 3 (2004)
Issue (Month): 19 ()
Pages: 1-11

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Handle: RePEc:ebl:ecbull:eb-04c20019
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  12. Paul R. Krugman, 1988. "Target Zones and Exchange Rate Dynamics," NBER Working Papers 2481, National Bureau of Economic Research, Inc.
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