Tests for Symmetric and Asymmetric Nonlinear Mean Reversion in Real Exchange Rates

By Robert Sollis, S. Leybourne, P. Newbold. 2002

127 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/100ac344c2389325df6e9f0a8d283cdbaef9cb8d

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. F. Bec
2. Alain Guay
3. E. Guerre
4. Robert Sollis
5. M. Stigler
6. Rehim Kilic
7. Pentti Saikkonen

In Finance

1. F. Bec
2. Alain Guay
3. E. Guerre
4. Robert Sollis
5. M. Stigler
6. Rehim Kilic

Citations in the corpus

• A simple unit root test against asymmetric STAR nonlinearity with an application to real exchange rates in Nordic countries (2009, methodology): “Sollis et al. (2002) propose a unit root test that allows for a form of asymmetric STAR nonlinearity under the alternative hypothesis, related to the ESTAR form.”
• Adaptive consistent unit-root tests based on autoregressive threshold model (2008, methodology): “Pippenger and Goering [1993] or Taylor [2001] have shown that although consistent, the DF test lacks power against nonlinear stationary alternatives.”