It is well known that goodness-of-fit measures lead to overfitting. We compare the small-sample properties of linear and several nonlinear models using a Monte Carlo study. A large number of linear series are generated and conventional methods of fitting nonlinear models are applied to each. The...

Tests of purchasing power parity (PPP) that use panel data are more supportive of the theory than are bilateral tests. The article uses threshold cointegration to explore long-run PPP. Using data from the post-Bretton Woods period, we show that cointegration with threshold adjustment holds for a...