We examine the asymptotic behavior of unit root tests against nonlinear alternatives of the exponential smooth transition type if the data is erroneously nonlinearly transformed. We show analytically and by a Monte Carlo study that the probability of rejecting the correct null of a random walk...

We examine the asymptotic behavior of unit root tests against nonlinear alternatives of the exponential smooth transition type if the data is erroneously nonlinearly transformed. We show analytically and by a Monte Carlo study that the probability of rejecting the correct null of a random walk...

Determining good parameter estimates in ESTAR models is known to be difficult. We showthat the phenomena of getting strongly biased estimators is a consequence of the so-calledidentication problem, the problem of properly distinguishing the transition function in relationto extreme parameter...

We consider a nonparametric test for the null of seasonal unit roots in quarterly time series that builds on the RUR (records unit root) test by Aparicio, Escribano, and Sipols. We find that the test concept is more promising than a formalization of visual aids such as plots by quarter. In order...

We extend fixed-b asymptotic theory to the nonparametric Phillips-Perron (PP) unit root tests. We show that the fixed-b limits depend on nuisance parameters in a complicated way. These non-pivotal limits provide an alternative theoretical explanation for the well known finite sample problems of...

A core stylized fact of the empirical exchange rate literature is that half-life deviationsof equilibrium real exchange rates from levels implied by Purchasing Power Parity(PPP) are very persistent. Empirical efforts to explain this persistence typicallyproceed along two distinct paths,...

This paper extends earlier studies on exchange rate expectations' formation by using newdata and adding information about forecasters' reliance on fundamental analysis for the firsttime. We replicate the conventional result of non rational expectations. Moreover, biases inexpectations are...

This paper examines whether, in addition to standard unit root and cointegration tests, panel approaches also produce test statistics behaving erratically when applied to tests for PPP. We show that if appropriate tests (which are robust to cross-sectional dependence and more powerful than...

We use recent advances in multiple testing to identify the countries for which Purchasing Power Parity (PPP) held over the last century. The approach controls the multiplicity problem inherent in simultaneously testing for PPP on several time series, thereby avoiding spurious rejections. It has...