EconStor >
University College Dublin (UCD) >
UCD School of Economics, University College Dublin (UCD) >
Working Paper Series, UCD School of Economics, University College Dublin (UCD) >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/43359
  
Title:Modelling Ireland's exchange rates: From EMS to EMU PDF Logo
Authors:Bond, Derek
Harrison, Michael J.
O'Brien, Edward J.
Issue Date:2007
Series/Report no.:Working paper series // UCD Centre for Economic Research 2007/18
Abstract:This paper attempts to model the nominal and real exchange rate for Ireland, relative to Germany and the UK from 1975 to 2003. It offers an overview of the theory of purchasing power parity (Ppp), focusing particularly on likely sources of nonlinearity. Potential difficulties in placing the analysis in the standard I(1)/I(0) framework are highlighted and comparisons with previous Irish studies are made. Tests for fractional integration and nonlinearity, including random field regressions, are discussed and applied. The results obtained highlight the likely inadequacies of the standard cointegration and Star approaches to modelling, and point instead to multiple structural changes models. Using this approach, both bilateral nominal exchange rates are effectively modelled, and in the case of Ireland and Germany, Ppp is found to be valid not only in the long run, but also in the medium term.
Subjects:purchasing power parity
fractional Dickey-Fuller tests
smooth transition autoregression
random field regression
multiple structural changes models
JEL:C22
C51
F31
F41
Document Type:Working Paper
Appears in Collections:Working Paper Series, UCD School of Economics, University College Dublin (UCD)

Files in This Item:
File Description SizeFormat
557449065.pdf297.09 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/43359

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.