The so-called Balassa-Samuelson model implies that relative prices of non-traded goods may be nonstationary and, hence, that PPP should preferably be tested on real exchange rates based on prices of traded goods only. We propose a simple test for PPP among traded goods which can be applied to...

In this paper we test for (Generalized) AutoRegressive Conditional Heteroskedasticity [(G)ARCH] in daily and weekly data on 22 exchange rates and 13 stock market indices using the standard Lagrange Multiplier [LM] test for GARCH and a new LM test that is resistant to additive outliers. The data...

Two important empirical features of monthly US unemployment are that shocks to the series seem rather persistent and that unemployment seems to rise faster in recessions than that it falls during expansions. To jointly capture these features of long memory and nonlinearity, respectively, we put...

This paper develops a return forecasting methodology that allows for instabil ity in the relationship between stock returns and predictor variables, for model uncertainty, and for parameter estimation uncertainty. The predictive regres sion speci¯cation that is put forward allows for occasional...

In this paper we investigate empirical specification of smooth transition error correction models (STECMs). These models can be used to describe linear long-run relationships between nonstationary variables where adjustment towards equilibrium is nonlinear and can depend on exogenous variables....

In this paper we put forward a new time series model, which describes nonlinearity and seasonality simultaneously. We discuss its representation, estimation of the parameters and inference. This seasonal STAR (SEASTAR) model is examined for its practical usefulness by applying it to 18 quarterly...

In this paper we investigate the properties of the Lagrange Multiplier (LM) test for autoregressive conditional heteroskedasticity (ARCH) and generalized ARCH (GARCH) in the presence of additive outliers (AO's). We show analytically that both the asymptotic size and power are adversely affected...

In this paper we examine the forecasting performance of five nonlinear GARCH(1,1) models. Four of these have recently been proposed in literature, while the fifth model is a new one. All five models allow for switching persistence of shocks, depending on the value and/or sign of recent returns....