We derive a definition of linear cointegration for nonlinear stochastic processes using a martingale representation theorem. The result shows that stationary linear cointegrations can exhibit nonlinear dynamics, in contrast with the normal assumption of linearity. We propose a sequential...

This study examines the long-run relationship between US and Mexican prices. We use panel cointegration techniques that allow for heterogeneous relationships across goods to examine the existence of weak-form and strong-form Purchasing Power Parity (PPP) between the US and Mexico. We construct...