Tests for symmetric and asymmetric nonlinear mean reversion in real exchange rates

Sollis, R.; Leybourne, S.J.; Newbold, P.

Abstract

New tests, based on smooth transition autoregressive models, for mean reversion in time series of real exchange rates are proposed. One test forces mean reversion to be symmetric about the integrated process central case, while the other permits asymmetry. The tests are applied to monthly series of seventeen real exchange rates against the U.S. dollar and fourteen against the deutsche mark. They reveal stronger evidence against the unit root null hypothesis than does the usual Dickey-Fuller test.

Citation

Sollis, R., Leybourne, S., & Newbold, P. (2002). Tests for symmetric and asymmetric nonlinear mean reversion in real exchange rates. Journal of Money, Credit and Banking, 34(3, Part 1), 686-700

• Journal Article Type: Article
• Publication Date: 2002-08
• Deposit Date: Aug 21, 2008
• Publicly Available Date: Aug 21, 2008
• Journal: Journal of Money, Credit and Banking
• Print ISSN: 0022-2879
• Electronic ISSN: 1538-4616
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 34
• Issue: 3, Part 1
• Pages: 686-700
• Keywords: Foreign exchange rates, Mathematical models.
• Public URL: https://durham-repository.worktribe.com/output/1630960
• Publisher URL: http://webmail.econ.ohio-state.edu/john/Volume34No3Pt1.php