Arbeitspapier

TAR models and real exchange rates

The recent past has seen an increased interest in piecewise linear real exchange rate models. By invoking Heckscher's (1916) 'commodity points' it has been argued that a threshold autoregressive (TAR) model should be used to study movements in the real exchange rate. This paper examines the problems of fitting TAR models to real exchange rates. We find that the power of the tests for TAR behavior can be very low for realistic parameter settings. Moreover the confidence intervalls for the threshold parameter are too wide to be used for economic analysis.

Language
Englisch

Bibliographic citation
Series: Working Paper ; No. 2001:21

Classification
Wirtschaft
Model Evaluation, Validation, and Selection
Foreign Exchange
Subject
PPP
real exchange rate
threshold autoregression

Event
Geistige Schöpfung
(who)
Johansson, Martin
Event
Veröffentlichung
(who)
Lund University, School of Economics and Management, Department of Economics
(where)
Lund
(when)
2001

Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Johansson, Martin
  • Lund University, School of Economics and Management, Department of Economics

Time of origin

  • 2001

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