This article investigates Granger causality between exchange rates and prices for the US and four of its trading partners: Canada, Germany, Japan and the UK. We emphasize the distinction between direct and indirect Granger causality: exchange rates directly cause prices if movements in exchange...

This paper proposes a nonlinear error-correction model based upon smooth transition regression methodology. The model is specified such that the short-run adjustment toward long-run equilibrium is nonlinear and that the error correction is a smooth function of long-run deviation. Empirical...