Standard unit root tests are not very powerful in drawing conclusions regarding the validity of Purchasing Power Parity (PPP). Rather than asking whether PPP holds throughout the whole sample period, we examine, in this study, if PPP holds sometimes by employing Hamilton-type (1989) Markov...

Recent advances in nonlinear cointegration analysis find evidence for a nonlinear long-run relation between the U.S. interest rate and inflation. Employing the Breitung's (2001) rank tests for nonlinear cointegration, we find herein little evidence for cointegration in the U.S. data. We also...

Recent empirical findings show that post-war real interest rates are quite persistent and that they also contain a large number of structural changes in their means. In this study, we also find concurring results for real interest rates from thirteen industrialized countries. We show, however,...

This note presents possibly hitherto unnoticed, or only implicitly discussed, properties of the stochastic unit root process developed in Granger and Swanson (1997) and Leybourne, McCabe, and Tremayne (1996).

This paper shows that the recently proposed tests of linear and logarithmic transformations for integrated processes against each other by Kobayashi and McAleer (1999) are severely biased for alternative hypotheses when the true data generating process is a stochastic unit root. An empirical...

Real exchange rates are quite persistent. Standard unit root tests are not very powerful in drawing a conclusion regarding the validity of purchasing power parity [PPP]. Rather than asking if PPP holds throughout the whole sample period, we examine if PPP holds sometimes by employing...

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...

Possibly hitherto unnoticed cointegrating relationships among integrated components of data series are identified. If the components are cointegrated, the data are said to ahve hidden cointegration. The implication of hidden cointegration on modeling data series themselves is discussed...