This paper tests the Purchasing Power Parity Theory of Exchange Rates dealing with Argentinean data for the period 1900-2006. This is equivalent to testing if the Real Exchange Rate is a stationary variable or if its components (the nominal exchange rate and the relative prices) are...

This paper proposes two new unit root tests that are appropriate in the presence of an unknown number of structural breaks. One is based on a single time series and the other is based on a panel of multiple series. For the estimation of the number of breaks and their locations, a simple...

This research points to the serious problem of potentially misspecified alternative hypotheses when testing for unit roots in real exchange rates. We apply a popular unit root test against nonlinear ESTAR and develop a Markov Switching unit root test. The empirical power of these tests against...

Nonlinear modeling of adjustments to purchasing power parity has recently gained much attention. However, a huge body of the empirical literature applies ES- TAR models and neglects the existence of other competing nonlinear models. Among these, the Markov Switching AR model has a strong...

This study addresses the issue of the presence of a unit root on the growth rate estimation by the least-squares approach. We argue that when the log of a variable contains a unit root, i.e., it is not stationary then the growth rate estimate from the log-linear trend model is not a valid...

In this paper we propose tests based on GLS-detrending for testing the null hypothesis of deterministic seasonality. Unlike existing tests for deterministic seasonality, our tests do not suff er from asymptotic size distortions under near integration. We also investigate the behavior of the...

The presence of transaction costs in trading implies a non-linear adjustment process of real exchange rates towards Purchasing Power Parity (PPP). This may make the traditional tests for PPP using a linear framework, which generally tend to refute the PPP hypothesis, unreliable. This study...

In ESTAR models it is usually difficult to determine parameter estimates, as it can be observed in the literature. We show that the phenomena of getting strongly biased estimators is a consequence of the so-called identification problem, the problem of properly distinguishing the transition...

The Perron test is the most commonly applied procedure to test for a unit root in the presence of a structural break of unknown timing in the trend function. Deriving the Perron-type test regression from an unobserved component model, it is shown that the test regression in fact is nonlinear in...

This paper considers testing the unit root hypothesis against a smooth transition autoregressive model as the alternative. The model specification makes it possible to discriminate between nonstationary random walk and stationary nonlinear processes. Some new limit results are presented,...