Summary Nonlinear dynamics in the term structure of German interest rates resulting from heterogenous transaction costs in the money market are analysed by means of the smooth transition technique introduced by Granger and Teräsvirta (1993). Tests for linearity, specific functional forms and...

Changes in foreign asset holdings are one channel through which agents adjust to macroeconomic shocks. In this paper, we test whether foreign bank assets change as a result of domestic and foreign macroeconomic shocks. We frame our empirical analysis in a standard new open economy macro model in...