caa a22 4500 467896445 CHVBK 20180406152805.0 cr unu---uuuuu 170328e20060601xx s 000 0 eng 10.1007/s00181-005-0026-5 doi (NATIONALLICENCE)springer-10.1007/s00181-005-0026-5 Heimonen Kari School of Business and Economics, University of Jyväskylä, P.O. BOX 35, FI-40014, University of Jyväskylä, Finland aut Nonlinear adjustment in PPP—evidence from threshold cointegration [Elektronische Daten] [Kari Heimonen] Nonlinearity in PPP has been carefully reported in number of studies. However, asymmetry with respect to the sign of the deviation and the dependency of the asymmetry on the exchange rate regime has largely remained outside the scope of those studies. The present paper partly fills this gap. It applies threshold cointegration techniques to real exchange rate dynamics between two Nordic countries, Finland and Sweden. First, it examines whether the sign of the deviation from equilibrium has any impact on adjustment. Second, it estimates an asymmetric band-type threshold cointegration in PPP. The results supported asymmetric adjustment in PPP. The single, asymmetric threshold indicated stronger adjustment during the flexible exchange rate regime. The band-type asymmetric threshold cointegration suggested that adjustment towards PPP would be fastest within the estimated band, which was interpreted as evidence for the target zone exchange rate regime. Accordingly, the inference on adjustment is sensitive to the type of nonlinearity used. Springer-Verlag, 2006 PPP nationallicence Asymmetric adjustment nationallicence Threshold cointegration nationallicence Empirical Economics Physica-Verlag 31/2(2006-06-01), 479-495 0377-7332 31:2<479 2006 31 181 https://doi.org/10.1007/s00181-005-0026-5 text/html Onlinezugriff via DOI 1 research-article jats NATIONALLICENCE 856 40 https://doi.org/10.1007/s00181-005-0026-5 text/html Onlinezugriff via DOI NATIONALLICENCE 100 1- Heimonen Kari School of Business and Economics, University of Jyväskylä, P.O. BOX 35, FI-40014, University of Jyväskylä, Finland aut NATIONALLICENCE 773 0- Empirical Economics Physica-Verlag 31/2(2006-06-01), 479-495 0377-7332 31:2<479 2006 31 181 Metadata rights reserved Springer special CC-BY-NC licence nationallicence BK010053 XK010053 XK010000 NATIONALLICENCE NATIONALLICENCE NL-springer