Nonlinearity and structural breaks in Irish PPP relationships: an application of random field regression

Derek Bond, Michael J. Harrison, Edward J. O'Brien

    Research output: Contribution to journal › Article

    Abstract

    Using nominal and real exchange rates for Ireland relative to Germany and the UK from 1975 to 2003, this article explores likely sources of nonlinearity in Purchasing Power Parity (PPP) relationships and difficulties in employing an I(1)/I(0) econometric framework. Tests for fractionalintegration and nonlinearity, including random field regression-based procedures, are applied. Results reveal shortcomings in the standard cointegration and smooth transition autoregression approaches to modelling, and point to multiple structural changes models. Such a model for the case of Ireland and Germany suggests that PPP holds not only in the long-run but also in the medium to short term.
    LanguageEnglish
    Pages1899-1911
    JournalApplied Economics
    Volume43
    Issue number15
    DOIs
    Publication statusPublished - 1 Jun 2011

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    Structural breaks
    Germany
    Random field
    Ireland
    Purchasing power parity
    Nonlinearity
    Structural change
    Smooth transition autoregression
    Modeling
    Nominal exchange rate
    Real exchange rate
    Econometrics
    Cointegration

    Cite this

    Bond, Derek ; Harrison, Michael J. ; O'Brien, Edward J. / Nonlinearity and structural breaks in Irish PPP relationships: an application of random field regression. In: Applied Economics. 2011 ; Vol. 43, No. 15. pp. 1899-1911.
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    Bond, D, Harrison, MJ & O'Brien, EJ 2011, 'Nonlinearity and structural breaks in Irish PPP relationships: an application of random field regression', Applied Economics, vol. 43, no. 15, pp. 1899-1911. https://doi.org/10.1080/00036840902780144

    Nonlinearity and structural breaks in Irish PPP relationships: an application of random field regression. / Bond, Derek; Harrison, Michael J.; O'Brien, Edward J.

    In: Applied Economics, Vol. 43, No. 15, 01.06.2011, p. 1899-1911.

    Research output: Contribution to journal › Article

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    Bond D, Harrison MJ, O'Brien EJ. Nonlinearity and structural breaks in Irish PPP relationships: an application of random field regression. Applied Economics. 2011 Jun 1;43(15):1899-1911. https://doi.org/10.1080/00036840902780144

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