A new panel unit root by Chang (Journal of Econometrics, 110, 261-92, 2002) is employed on a set of financial ratios with a view to improving the power of unit root tests when applied to a relatively small number of observations (in the present case 38 annual observations). The test is...

Two different approaches intend to resolve the 'puzzling' slow convergence to purchasing power parity (PPP) reported in the literature [see Rogoff (1996), "Journal of Economic Literature", Vol. 34.] On the one hand, there are models that consider a non-linear adjustment of real exchange rate to...

Slow adjustment of real exchange rate towards equilibrium in linear models has long puzzled researchers, stimulating the adoption of nonlinear models. The exponential smooth transition model has been particularly successful, providing faster adjustment speeds. This paper discusses some of its...

We analyze the nonlinear behavior of the information content in the spread for future real economic activity. The spread linearly predicts one year ahead real growth in nine industrial production sectors of the US and four of the UK over the last forty years. However, recent investigations on...

We analyse the nonlinear behaviour of the information content in the spread for future real economic activity. The spread linearly predicts one-year-ahead real growth in nine industrial production sectors of the USA and four of the UK over the last 40 years. However, recent investigations on the...

This paper re-evaluates the time series properties of financial ratios. It presents new empirical analysis which explicitly allows for the possibility that financial ratios can be characterized as non-linear mean-reverting processes. Financial ratios are widely employed as explanatory variables...