Are Real Exchange Rates Nonlinear or Nonstationary? Evidence from a New Threshold Unit Root Test
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Erdem Basci
We analyze the post-float real exchange rates for a group of OECD countries using the newly developed threshold test and tests for unit roots against stationary but nonlinear alternative by Caner and Hansen ( 2001). These tools help us disentangle the nonlinearity from the nonstationarity rigorously for the first time in the literature. After applying the threshold test and unit root tests: we find evidence for non-linearity of exchange rates. Specifically real exchange rates behave like a unit root in a band and when the depreciation or appreciation of the currency against $US exceeds the boundaries of the band , the real exchange rates are mean-reverting. The threshold value is treated as unknown and estimated in the model.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Artikel in diesem Heft
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- Can GARCH Models Capture Long-Range Dependence?
- Are Real Exchange Rates Nonlinear or Nonstationary? Evidence from a New Threshold Unit Root Test
- Detecting Nonlinearity in Time Series: Surrogate and Bootstrap Approaches
- The International CAPM and a Wavelet-Based Decomposition of Value at Risk
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Artikel in diesem Heft
- Article
- Can GARCH Models Capture Long-Range Dependence?
- Are Real Exchange Rates Nonlinear or Nonstationary? Evidence from a New Threshold Unit Root Test
- Detecting Nonlinearity in Time Series: Surrogate and Bootstrap Approaches
- The International CAPM and a Wavelet-Based Decomposition of Value at Risk
- Dual Long Memory in Inflation Dynamics across Countries of the Euro Area and the Link between Inflation Uncertainty and Macroeconomic Performance
- Forecasting Stock Market Volatility with Regime-Switching GARCH Models
