Department: Economics.

Motivated by growing evidence of nonlinear mean-reverting behavior in real exchange rates, this paper investigates the underlying dynamics in the context of a threshold vector error correction model (TVECM) of nominal exchange rate and relative prices. Unlike univariate models, our nonlinear...

When speculation causes share prices to fluctuate, even the best speculators may do 'hardly better than the comprehensive common-stock averages' (Samuelson). We further demonstrate in this paper that non-speculators can indeed benefit, in terms of both utility and wealth, from speculative price...