The detection of explosive behavior in house prices and the implementation of early warning diagnosis tests are of great importance for policy-making. This paper applies the GSADF test developed by Phillips et al. (2012) and Phillips et al. (2013), a novel procedure for testing, detection and...

This paper re-examines the empirical modeling of Purchasing Power Parity (PPP) deviations in the presence of commodity market frictions. First, we show that a specific type of smooth transition models can closely approximate the functional form of the theoretical adjustment mechanism derived by...

We analyze the nonlinear behavior of the information content in the spread for future real economic activity. The spread linearly predicts one year ahead real growth in nine industrial production sectors of the US and four of the UK over the last forty years. However, recent investigations on...

Hegwood and Papell (2002) conclude on the basis of analysis in a linear framework that long-run purchasing power parity (PPP) does not hold for 16 real exchange rate series, which were analyzed in Diebold, Husted, and Rush (1991) for the period 1792–1913 under the Gold Standard. Rather, PPP...

Based on the cost‐of‐carry model of future prices, a number of studies have estimated nonlinear autoregressive models for the basis at different frequencies (see, e.g., Dwyer GP, Locke, P, & Yu, W, <link href="#bib7">1996</link>; Monoyios M and Sarno L, <link href="#bib15">2002</link>; Taylor N, van Dijk D, Franses PH, & Lucas A, <link href="#bib26">2000</link>). The...

A stylized fact of US inflation dynamics is one of extreme persistence and possible unit root behavior. If so, the implications for macroeconomics and monetary policy are somewhat unpalatable. Our econometric analysis proposes a parsimonious representation of the inflation process, the nonlinear...

Nonlinear models of deviations from PPP have recently provided an important, theoretically well motivated, contribution to the PPP puzzle. Most of these studies use temporally aggregated data to empirically estimate the nonlinear models. As noted by Taylor (2001), if the true DGP is nonlinear,...

A stylized fact of US inflation dynamics is one of extreme persistence and possible unit root behavior. If so, the implications for macroeconomics and monetary policy are somewhat unpalatable. Our econometric analysis proposes a parsimonious representation of the inflation process, the nonlinear...