earticle

영어

This paper investigates the real exchange rate behaviour under potential existence of nonlinearity. In order to conduct the nonlinearity test, both linear and non-linear autoregressive unit root tests are applied to four different real exchange rates from mixture of industrialized and developing countries. We found that all countries, there is strong threshold effect while the unit root tests show the mixed results depending on countries. This finding implies standard linear unit root tests turn out biased in favour of random work when the true process is nonlinear mean reversion. When half-lives deviation from equilibrium is calculated, the result is much smaller in threshold autoregressive (TAR) specification than linear model.