We estimate exponential smooth transition autoregressive (ESTAR) models of deviations from PPP, which are obtained using the Johansen cointegration method, for both CPI-and WPIbased measures and a broad set of U.S. trading partners. In several cases, we nd clear evidence of a mean-reverting dynamic process for sizable deviations from PPP, with the equilibrium tendency varying nonlinearly with the magnitude of disequilibrium. Analysis of impulse response functions also supports a nonlinear dynamic structure, but convergence to long-run PPP in the post-Bretton Woods era is very slow.

We investigate the impact of measures of uncertainty on firms' capital investment behavior using a panel of U.S. firms. Increases in firmspecific and CAPM -based measures have a significant negative effect on investment spending, while market-based uncertainty has a positive impact.

In this paper, we empirically investigate the impact of exchange rate volatility on real international trade ows utilizing a 13 country dataset of monthly bilateral real exports for 1980 1998. We compute one month ahead exchange rate volatility from the intra monthly variations in the exchange rate to better quantify this latent variable. We nd that the effect of exchange rate volatility on trade ows is nonlin- 1We acknowledge the expert research assistance provided by Tairi Room, and thank John Barkoulas and Franc Klaassen for productive conversations on these issues. Consultations with Nicholas J. Cox on programming practices were very helpful. We received useful comments on an earlier

We investigate the analytical and empirical linkages between cash flow, uncertainty and firms' capital investment behavior. Our empirical approach constructs measures of own-and market-specific uncertainty from firms' daily stock returns and S&P 500 index returns along with a CAPM-based risk measure. Our results indicate that even in the presence of important firm-specific variables, uncertainty is an important determinant of firms' investment behavior. Depending on the measure of uncertainty used, investment may be stimulated or curtailed by the effects of uncertainty on its own or through its interactions on cash flow.Keywords: capital investment, cash flow, uncertainty, CAPM JEL: E22, D81, C23 * We are grateful for comments received from seminar participants at Koç University, the University of Strathclyde and the 13th International Conference on Panel Data, University of Cambridge, Fabio Schiantarelli and the constructive suggestions of an anonymous reviewer.

This paper empirically investigates whether changes in macroeconomic volatility affect the efficient allocation of non‐financial firms' liquid assets. We argue that higher uncertainty will hamper managers' ability to accurately predict firm‐specific information and induce them to implement similar cash management policies. Contrarily, when the macroeconomic environment becomes more tranquil, each manager will have the latitude to behave more idiosyncratically as she can adjust liquid assets based on the specific requirements of the firm, bringing about a more efficient allocation of liquid assets. Our empirical analysis provides support for these predictions.