This paper compares the ability of nonlinear and standard linear models to capture the dynamics of foreign exchanges rates in the presence of structural breaks. The analysis is conducted for three East Asian countries, namely Indonesia, South Korea and Thailand. It is shown that a Markov...

In this article we examine the sensitivity of the foreign exchange market to central bank intervention. Using a time varying Markov switching model we separate periods of relatively stable market conditions from volatile periods and look at the dynamic of the causality effect under different...