Temporal aggregation of an ESTAR process: some implications for purchasing power parity adjustment

David A. Peel and Ivan Paya ()

Journal of Applied Econometrics, 2006, vol. 21, issue 5, pages 655-668

Abstract: 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, the temporally aggregated data could exhibit misleading properties regarding the adjustment speeds. We examine the effects of different levels of temporal aggregation on estimates of ESTAR models of real exchange rates. Copyright © 2006 John Wiley & Sons, Ltd.

Date: 2006
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Related works:
Working Paper: TEMPORAL AGGREGATION OF AN ESTAR PROCESS: SOME IMPLICATIONS FOR PURCHASING POWER PARITY ADJUSTMENT (2004)
Working Paper: Temporal aggregation of an ESTAR process: some implications for purchasing power parity adjustment (2005)
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