The standard macroeconomic view links the equilibrium level of foreign exchange rates to the state of the macroeconomic fundamentals. Any deviation from the equilibrium level is viewed as temporary since there are forces ensuring quickly mean-reverting dynamics. The aim of this article is to...

Our object is to study the adjustment process of five European exchange rates toward their fundamentals on the 1979-1999 period. We consider two approaches, namely nonlinear cointegration and fractional cointegration, in order to discriminate between nonlinear short memory and linear long memory...