This paper tests for the presence of output mean and variance nonlinearities in international industrial production and UK and US sectoral production growth rates using ARMA-GQARCH, bilinear (BL) and joint BL-GQARCH models. ARMA-GQARCH models confirm the presence of asymmetric variance effects...

Rogoff suggested in 1996 that the dollar-yen real exchange rate represented a 'canonical' case of a trend in the equilibrium real exchange rate. The implied speed of adjustment of the dollar-yen real exchange rate is found to be substantially faster, with half-life shocks of less than 2 years,...

Equilibrium models of real exchange rate determination in the presence of transactions costs imply a nonlinear adjustment process toward purchasing power parity (PPP). Conventional cointegration tests, which ignore the effect of transactions costs, may be biased against the long-run PPP...