Three-regime asymmetric STAR modeling and exchange rate reversion

Cerrato, M. , Kim, H. and MacDonald, R. (2010) Three-regime asymmetric STAR modeling and exchange rate reversion. Journal of Money, Credit and Banking, 42(7), pp. 1447-1467. (doi:10.1111/j.1538-4616.2010.00349.x)

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The breakdown of the Bretton Woods system and the adoption of generalized floating exchange rates ushered in a new era of exchange rate volatility and uncertainty. This increased volatility leads economists to search for economic models able to describe observed exchange rate behavior. In the present paper, we propose more general STAR transition functions that encompass both threshold nonlinearity and asymmetric effects. Our framework allows for a gradual adjustment from one regime to another and considers threshold effects by encompassing other existing models, such as TAR models. We apply our methodology to three different exchange rate data sets: one for developing countries and official nominal exchange rates, the second for emerging market economies using black market exchange rates, and the third for OECD economies.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Cerrato, Professor Mario and MacDonald, Professor Ronald
Authors: Cerrato, M., Kim, H., and MacDonald, R.
Subjects:H Social Sciences > HG Finance
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Money, Credit and Banking
ISSN (Online):1538-4616
Published Online:06 September 2010

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