The purpose of this paper is to re-investigate issues in purchasing power parity (PPP) convergence using a threshold vector error-correction model with deutschmark-based exchange rates. We find that the half-life of real exchange rates is less than two and a half years, that PPP convergence is...

The purpose of this paper is to apply a symmetric band threshold autoregressive model to investigate the non-linear adjustment of the real pound-dollar rate over a period from 1885 to 2003. After controlling for the Harrod-Balassa-Samuelson effects, we find evidence to support a non-linear mean...