Various unit roots tests are suggested over the years. However, many of them suffer severe size problems as well as low power. Recently, Ng and Perron (Econometrica, 69, 1519-1554, 2001) propose new modelling strategy that yields good power and reliable size. This letter applies their testing...

Even though there is little evidence for linear cointegration, Christopoulos and Leon-Ledesma (2007) recently have found nonlinear cointegrating relations between the US quarterly nominal interest rate and CPI inflation rate. Through Monte Carlo simulations, they also show that the nonlinear...

Threshold-type nonlinear relations are pretty popular in modelling the deviations from purchasing power parity. This article shows that there is a close relation between the nonlinear band Threshold Autoregressive (TAR) models studied by Obstfeld and Taylor (1997) and Stochastic Unit Root (STUR)...

Employing disaggregated real exchange rates from nine European counties in 16 goods categories, we assess in this study the nonlinearity in the real exchange rates. Surprisingly, we find evidence for nonlinearity in only four (10) out of 143 series with the linearity test proposed by Harvey et...

This article estimates common structural breaks among four long-term UK bond yields, which shared a V-shaped trending behaviour during the sample period of 1870 to 1914. By applying the new inference procedure proposed by Qu and Perron (2007) for structural breaks in multivariate regressions, we...

This article reports, confirming evidence for long memory in the return volatility from equity, and foreign exchange markets with the newly proposed increment ratio statistic by Surgailis et al. (2007). The test is robust to changing means, slowly varying trends and other nonstationarities. In...

It is generally believed that the political and economic stability pertaining during the heyday of Britain's imperial power contributed to reduced uncertainty in the UK financial markets at that time. Employing quite a unique data set for the sample period spanning 1850-1914, we examine in this...

In this study, we have assessed the performance of the nonparametric measure of convergence towards purchasing power parity, as previously suggested by Shintani (2006). While the measure, which is also applicable to nonlinear processes, should correspond to the exact half-life of a linear...

In this study, we evaluate the linearity of 170 major monthly US macroeconomic time series spanning the years 1959-2002. Employing the linearity test recently proposed by Harvey et al. (2008), which is applicable when the order of integration is uncertain, we determined that more than half of...

This paper demonstrates that a naive forecast of no change can produce lower mean square forecast errors than those from true models when structural change exists.