Temporal aggregation of an ESTAR process

Ivan Paya () and David Peel

No 565938, Working Papers from Lancaster University Management School, Economics Department

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.

Keywords: ESTAR; Real Exchange Rate; Purchasing Power Parity; Aggregation. (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (1)

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