IDEAS home Printed from https://ideas.repec.org/a/eee/jimfin/v27y2008i4p516-528.html
   My bibliography  Save this article

U.S. dollar real exchange rates: Nonlinearity revisited

Author

Listed:
  • Sollis, Robert

Abstract

Previous empirical work employing smooth transition autoregressive (STAR) models has found that U.S. dollar real exchange rates are nonlinear mean reverting processes. We utilise tests developed from time-varying smooth transition autoregressive (TV-STAR) models to re-examine dollar-based rates. These tests reveal that structural change is an important feature of the data. In some cases there is support for both nonlinearity and structural change, while in other cases there appears to be stronger support for structural change than for nonlinearity. The results raise a number of interesting issues for future research.

Suggested Citation

  • Sollis, Robert, 2008. "U.S. dollar real exchange rates: Nonlinearity revisited," Journal of International Money and Finance, Elsevier, vol. 27(4), pages 516-528, June.
  • Handle: RePEc:eee:jimfin:v:27:y:2008:i:4:p:516-528
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0261-5606(08)00034-X
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michael, Panos & Nobay, A Robert & Peel, David A, 1997. "Transactions Costs and Nonlinear Adjustment in Real Exchange Rates: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 862-879, August.
    2. Lothian, James R., 1998. "Some new stylized facts of floating exchange rates," Journal of International Money and Finance, Elsevier, vol. 17(1), pages 29-39, February.
    3. Papell, David H., 2002. "The great appreciation, the great depreciation, and the purchasing power parity hypothesis," Journal of International Economics, Elsevier, vol. 57(1), pages 51-82, June.
    4. Enders, Walter & Siklos, Pierre L, 2001. "Cointegration and Threshold Adjustment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(2), pages 166-176, April.
    5. 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 1015-1042, November.
    6. Wooldridge, Jeffrey M., 1991. "On the application of robust, regression- based diagnostics to models of conditional means and conditional variances," Journal of Econometrics, Elsevier, vol. 47(1), pages 5-46, January.
    7. Rehim Kilic, 2004. "Linearity tests and stationarity," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 55-62, June.
    8. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-144, January.
    9. 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.
    10. 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 153-180.
    11. Lin, Chien-Fu Jeff & Terasvirta, Timo, 1994. "Testing the constancy of regression parameters against continuous structural change," Journal of Econometrics, Elsevier, vol. 62(2), pages 211-228, June.
    12. Robert Sollis, 2005. "Evidence on purchasing power parity from univariate models: the case of smooth transition trend-stationarity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 79-98.
    13. Lundbergh, Stefan & Terasvirta, Timo & van Dijk, Dick, 2003. "Time-Varying Smooth Transition Autoregressive Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 104-121, January.
    14. Harvey, David & Leybourne, Stephen & Newbold, Paul, 1997. "Testing the equality of prediction mean squared errors," International Journal of Forecasting, Elsevier, vol. 13(2), pages 281-291, June.
    15. Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-311, July.
    16. Baum, Christopher F. & Barkoulas, John T. & Caglayan, Mustafa, 2001. "Nonlinear adjustment to purchasing power parity in the post-Bretton Woods era," Journal of International Money and Finance, Elsevier, vol. 20(3), pages 379-399, June.
    17. Benninga, Simon & Protopapadakis, Aris, 1988. "The equilibrium pricing of exchange rates and assets when trade takes time," Journal of International Money and Finance, Elsevier, vol. 7(2), pages 129-149, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alberto Humala & Gabriel Rodriguez, 2010. "Foreign exchange intervention and exchange rate volatility in Peru," Applied Economics Letters, Taylor & Francis Journals, vol. 17(15), pages 1485-1491.
    2. 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?," Economic Modelling, Elsevier, vol. 28(3), pages 1279-1290, May.
    3. 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.
    4. Hasanov, Mübariz & Araç, Aysen & Telatar, Funda, 2010. "Nonlinearity and structural stability in the Phillips curve: Evidence from Turkey," Economic Modelling, Elsevier, vol. 27(5), pages 1103-1115, September.
    5. Christopoulos, Dimitris K. & León-Ledesma, Miguel A., 2010. "Smooth breaks and non-linear mean reversion: Post-Bretton Woods real exchange rates," Journal of International Money and Finance, Elsevier, vol. 29(6), pages 1076-1093, October.
    6. Singh, Tarlok, 2014. "On the regime-switching and asymmetric dynamics of economic growth in the OECD countries," Research in Economics, Elsevier, vol. 68(2), pages 169-192.
    7. Cushman, David O. & Michael, Nils, 2011. "Nonlinear trends in real exchange rates: A panel unit root test approach," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1619-1637.
    8. Axel Grossmann & Marc Simpson & Teofilo Ozuna, 2014. "Investigating the PPP hypothesis using constructed U.S. dollar equilibrium exchange rate misalignments over the post-bretton woods period," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 38(2), pages 235-268, April.
    9. repec:eee:asieco:v:50:y:2017:i:c:p:62-72 is not listed on IDEAS
    10. Omay, Tolga & Hasanov, Mubariz & Emirmahmutoglu, Furkan, 2014. "Structural Break, Nonlinearity, and Asymmetry: A re-examination of PPP proposition," MPRA Paper 62335, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jimfin:v:27:y:2008:i:4:p:516-528. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/30443 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.