Purchasing power parity and structural instability in the US/UK exchange rate

► This study uses data from 1885 to test for non-linear purchasing power parity. ► Testing for structural instability suggests nine breaks in the data. ► The non-linear cointegration results suggest cointegration in some segments. ► Cointegration and non-linearity are found for fixed but not flexible exchange rates. ► This finding is due to intervention being more likely during fixed regimes.