U.S. dollar real exchange rates: nonlinearity revisited

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  2. Professor Robert Sollis
Author(s)Sollis R
Publication type Article
JournalJournal of International Money and Finance
ISSN (print)0261-5606
ISSN (electronic)1873-0639
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Previous empirical work employing smooth transition autoregressive (STAR) models has found that U.S. dollar real exchange rates are nonlinear mean reverting processes. We utilise tests developed from time-varying smooth transition autoregressive (TV-STAR) models to re-examine dollar-based rates. These tests reveal that structural change is an important feature of the data. In some cases there is support for both nonlinearity and structural change, while in other cases there appears to be stronger support for structural change than for nonlinearity. The results raise a number of interesting issues for future research.
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