Time-Varying Thresholds: An Application to Purchasing Power Parity Serineh Najarian

ISBN: 9781282109575

Published: May 9th 2014

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68 pages


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Time-Varying Thresholds: An Application to Purchasing Power Parity  by  Serineh Najarian

Time-Varying Thresholds: An Application to Purchasing Power Parity by Serineh Najarian
May 9th 2014 | ebook | PDF, EPUB, FB2, DjVu, AUDIO, mp3, RTF | 68 pages | ISBN: 9781282109575 | 4.72 Mb

This paper introduces a time-varying threshold autoregressive model (TVTAR), which is used to examine the persistence of deviations from PPP. We find support for the stationary TVTAR against the unit root hypothesis- however, for some developingMoreThis paper introduces a time-varying threshold autoregressive model (TVTAR), which is used to examine the persistence of deviations from PPP. We find support for the stationary TVTAR against the unit root hypothesis- however, for some developing countries, we do not reject the TVTAR with a unit root in the corridor regime.

We calculate magnitudes, frequencies, and durations of the deviations of exchange rates from forecasted changes in exchange rates. A key result is asymmetric adjustment. In developing countries, the average cumulative deviation from forecasts during periods when exchange rates are below forecasts is twice the corresponding measure during periods when exchange rates are above forecasts.



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