The application of the law of one price to the international market is purchasing power parity. Purchasing power parity associates the prices of all goods used in foreign trade with the exchange rate. If the purchasing power parity is valid, the changes in the nominal exchange rates balance the...

The application of the law of one price to the international market is purchasing power parity. Purchasing power parity associates the prices of all goods used in foreign trade with the exchange rate. If the purchasing power parity is valid, the changes in the nominal exchange rates balance the...

The application of the law of one price to the international market is purchasing power parity. Purchasing power parity associates the prices of all goods used in foreign trade with the exchange rate. If the purchasing power parity is valid, the changes in the nominal exchange rates balance the...

The forecast performance of the empirical ESTAR model of Taylor et al. (2001) is examined for 4 bilateral real exchange rate series over an out-of-sample evaluation period of nearly 12 years. Point as well as density forecasts are evaluated relative to a simple AR(1) specification, considering...

The forecast performance of the empirical ESTAR model of Taylor, Peel and Sarno (2001) is examined for 4 bilateral real exchange rate series over an out-of-sample evaluation period of nearly 12 years. Point as well as density forecasts are constructed, considering forecast horizons of 1 to 22...

Understanding the impact of exchange rate movements on prices is critical from a policy perspective in order to gauge the appropriate monetary policy response to currency movements. This study assesses the extent to which the movements in exchange rate affect domestic consumer prices in Pakistan...

Real exchange rate misalignment measures deviations of actual real exchange rate from its long-run, or equilibrium, level. Policy makers and many researchers are interested in predicting and monitoring misalignment in the foreign exchange market, because, in many cases, it is closely related to...

This paper presents unit-root test results for real exchange rates in ten Central and Eastern European transition countries during 1993:01-2003:12. Because of the shift from controlled to market economies and the accompanying crises, failed policy regimes and changes in exchange rate regimes,...

In this study we analyse the issue of mean reversion in forward discount based on nonlinear framework for seven currencies. Compared to previous study, we apply a novel approach of a threshold regression (TAR) and followed by nonlinear unit root tests. This approach disentangles tbodhe issue of...