Testing for a unit root in ERM exchange rates in the presence of structural breaks: evidence from the bootstrap
This paper explores the extent to which accounting for structural breaks in ERM exchange rates affects inferences on the presence of a unit root in these exchange rates. Four ERM exchange rates, found by previous empirical studies to be nonstationary, are examined. In contrast to previous empirical studies, multiple structural breaks are allowed for to account for multiple realignments in the central parities of these exchange rates. Bootstrapped critical values, personalized to the pattern of breaks of each exchange rate, are used for statistical inference. Consistent with the theoretical conclusion by Froot and Obstfeld (1991), the results suggest that all four ERM exchange rates are stationary. Therefore, accounting for breaks in ERM exchange rates does affect inferences on the presence of a unit root in these exchange rates.
If 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.
Volume (Year): 5 (1998)
Issue (Month): 7 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEL20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEL20|