Slow adjustment of real exchange rate towards its long run equilibrium in linear models has long puzzled researchers and provided the impetus for the adoption of particular classes of nonlinear models. The exponential smooth transition model has been particularly successful as an ex post...

This paper extends the results of Byers, Davidson and Peel (1997) on long memory in support for the Conservative and Labour Parties in the UK using longer samples and additional poll series. It finds continuing support for the ARFIMA(0,d,0) model though with somewhat smaller values of the long...

Whilst Cumulative Prospect theory (CPT) provides an explanation of gambling on longshots at actuarially unfair odds, it cannot explain why people might bet on more favoured outcomes. This paper shows that this is explicable if the degree of loss aversion experienced by the agent is reduced for...

Economic growth models under uncertainty and rational agents with CRRA utility have been shown to provide quite fragile explanations of consumers.choice as equlib- rium comsumption paths (expected utility) are drastically dependant on distributional assumptions. We show that assuming a SNP...

This paper deals with the nonlinear modeling and forecasting of the dollar-sterling real exchange rate using a long span of data. Our contribution is threefold. First, we provide significant evidence of smooth transition dynamics in the series by employing a battery of recently developed...

The specification of Smooth Transition Regression models consists of a sequence of tests, which are typically based on the assumption of i.i.d. errors. In this paper we examine the impact of conditional heteroskedasticity and investigate the performance of several heteroskedasticity robust...

In this paper we propose a globally stationary augmentation of the Exponential Smooth Transition Autoregressive (ESTAR) model that allows for multiple fixed points in the transition function. An F-type test statistic for the null of nonstationarity against such globally stationary nonlinear...

This paper provides evidence that some aggregate and regional U.S. real house price indices exhibited a bubble in the last few years according to the Phillips et al. (2007) unit root test. We subsequently investigate whether house price acceleration (deceleration) had a signi.cant impact on...

Slow adjustment of real exchange rate towards its long run equilibrium in linear models has long puzzled researchers and provided the impetus for the adoption of particular classes of nonlinear models. The exponential smooth transition model has been particularly successful as an ex post...

Previous empirical work on the Purchasing Power Parity does not explicitly account for time-varying trade costs. Motivated by the recent gravity literature we incorporate a microfounded measure of trade costs into two nonlinear regression models for the real exchange rate. Using data for the...