We provide empirical evidence that deviations from uncovered interest rate parity (UIP) display significant nonlinearities, consistent with theories based on transaction costs or limits to speculation. This evidence suggests that the forward bias documented in the literature may be less...

This paper examines the impact of the introduction of inflation targeting on the unemployment-inflation trade-off in OECD countries. Theoretical models suggest that the credibility-enhancing effects of the adoption of inflation targeting should cause an improvement in the unemployment-inflation...

This paper examines whether deviations from PPP are stationary in the presence of nonlinearity, and whether the adjustment toward PPP is symmetric from above and below. Using alternative nonlinear models, our results support mean reversion and asymmetric adjustment dynamics. We find differences...

Statistical measures of the volatility of exchange rates, interest rates, and stock prices are estimated for a number of countries. Periods of high volatility are identified and compared with periods of financial difficulty. The results indicate that GARCH models of volatility could be...

Motivated by the global inflation episode of 2007-08 and concern that high levels of inflation could undermine growth, this paper uses a panel of 165 countries and data for 1960-2007 to revisit the nexus between inflation and growth. We use a smooth transition model to investigate the speed at...

This paper introduces a time-varying threshold autoregressive model (TVTAR), which is used to examine the persistence of deviations from PPP. We find support for the stationary TVTAR against the unit root hypothesis; however, for some developing countries, we do not reject the TVTAR with a unit...

This paper provides a selective overview of nonlinear exchange rate models recently proposed in the literature and assesses their contribution to understanding exchange rate behavior. Two key questions are examined. The first question is whether nonlinear autoregressive models of real exchange...