A fractionally integrated exponential STAR model applied to the US real effective exchange rate

The aim of this paper is to study the dynamics of the US real effective exchange rate by capturing nonlinearity and long memory features. In this context, we use the family of fractionally integrated STAR (FISTAR) models proposed by van Dijk, Franses and Paap (2002) in the case when the transition function is an exponential function and we develop an estimation procedure. Indeed, these models can take into account processes characterized by several distinct dynamic regimes and persistence phenomena.