Threshold stationary real exchange rates: a nonlinear, multivariate approach

Philip Shively ()
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Philip Shively: Lafayette College

Economics Bulletin, 2003, vol. 6, issue 2, 1-11

Abstract: Purchasing power parity implies that real exchange rates are stationary. However, the finding of nonstationary real exchange rates has been difficult to dismiss. Using a nonlinear, three-regime structural bivariate threshold model, this paper finds evidence of threshold stationary real exchange rates which is consistent with purchasing power parity adjusted for market frictions such as transaction costs.

JEL-codes: F3 (search for similar items in EconPapers)
Date: 2003-05-08
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