By testing for the presence of multiple changes in persistence at a priori unknown dates in the real exchange rates spanning more than 100 years over different nominal exchange rate regimes, this note shows that the real exchange rates are more likely to be stationary during the fixed nominal...

By allowing for multiple changes in persistence, this note shows that the US/UK real exchange rate spanning two centuries is stationary. This result is consistent with the previous one in Lothian and Taylor (1996, 2000) and purchasing power parity is a useful approximation in the long run.

This article examines the validity of purchasing power parity by estimating long memory parameters with recently suggested exact local Whittle estimators of Shimotsu and Phillips (2005). Little evidence is found for stationarity in the real exchange rates spanning more than 100 years from 16...

This paper demonstrates that a naive forecast of no change can produce lower mean square forecast errors than those from true models when structural change exists.

Even though there is little evidence for linear cointegration, Christopoulos and Leon-Ledesma (2007) recently have found nonlinear cointegrating relations between the US quarterly nominal interest rate and CPI inflation rate. Through Monte Carlo simulations, they also show that the nonlinear...

Threshold-type nonlinear relations are pretty popular in modelling the deviations from purchasing power parity. This article shows that there is a close relation between the nonlinear band Threshold Autoregressive (TAR) models studied by Obstfeld and Taylor (1997) and Stochastic Unit Root (STUR)...

Employing disaggregated real exchange rates from nine European counties in 16 goods categories, we assess in this study the nonlinearity in the real exchange rates. Surprisingly, we find evidence for nonlinearity in only four (10) out of 143 series with the linearity test proposed by Harvey et...

Various unit roots tests are suggested over the years. However, many of them suffer severe size problems as well as low power. Recently, Ng and Perron (Econometrica, 69, 1519-1554, 2001) propose new modelling strategy that yields good power and reliable size. This letter applies their testing...

This article reports, confirming evidence for long memory in the return volatility from equity, and foreign exchange markets with the newly proposed increment ratio statistic by Surgailis et al. (2007). The test is robust to changing means, slowly varying trends and other nonstationarities. In...

It is generally believed that the political and economic stability pertaining during the heyday of Britain's imperial power contributed to reduced uncertainty in the UK financial markets at that time. Employing quite a unique data set for the sample period spanning 1850-1914, we examine in this...