haku: @indexterm PURCHASING POWER / yhteensä: 65
viite: 12 / 65
| Tekijä: | Michael, P. Nobay, A. R. Peel, D. A. |
| Otsikko: | Transactions costs and nonlinear adjustment in real exchange rates: An empirical investigation |
| Lehti: | Journal of Political Economy
1997 : AUG, VOL. 105:4, p. 862-879 |
| Asiasana: | EXCHANGE RATES TRANSACTION COSTS PURCHASING POWER |
| Kieli: | eng |
| Tiivistelmä: | A stylized empirical finding is the high persistence in deviations from purchasing power parity (PPP). This feature together with the low power of unit root tests may account for the widespread failure of empirical tests to support longrun PPP. This study provides an alternative explanation by considering the effect of transactions costs. Dumas's analysis implies a nonlinear adjustment process in which the larger the deviation from PPP, the stronger the tendency to move back to equilibrium. Within the transactions band the process is divergent so that the real exchange rate spends most of the time away from parity. Thus highly persistent deviations from PPP are implied, but the dynamic process is mean-reverting. Such an adjustment process can be represented in terms of an ESTAR model subject to appropriate parameter restrictions. |
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