In this note the empirical evidence presented by Karfakis and Moschos (1990) and Katsimbris and Miller (1993) on interest rate linkages in the EMS is reinterpreted and their finding of non-stationarity of interest rate differentials in the EMS is rationalized. It is argued that their results are...

Using Monte Carlo simulations, it is shown that fitting a mis-specified GARCH model to a true MS-GARCH process tends to produce IGARCH parameter estimates. In other words, the presence of structural breaks can result in spuriously high estimates of the degree of persistence of shocks to the...