Modelling the misalignments of the Dollar-Sterling real exchange rate: a nonlinear cointegration perspective
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 (1957-202). We conclude that two NEC models adequately describe the nonlinear mean-reverting mechanism: smooth transition and rational polynomial NEC models.
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