Long-Memory Exchange Rate Dynamics in the Euro Era
Document Type
Article
Publication Date
5-2016
Publication Title
Chaos, Solitons and Fractals
DOI
10.1016/j.chaos.2016.02.007
ISSN
0960-0779
Abstract
We investigate the long-run dynamics of a system of eight major exchange rates in the euro era using both integer and fractional cointegration methodologies. Contrary to the fragile evidence in the pre-euro era, robust evidence of linear cointegratedness is obtained in the foreign exchange market during the euro era. Upon closer examination, deviations from the cointegrating relationship exhibit nonstationary, long-memory dynamic behavior (Joseph effect). We find the long-memory evidence to be temporally stable in the most recent era. Finally, the foreign exchange system dynamics appears to be characterized by less persistence (smaller fractional exponent) in the euro era (as compared to pre-euro time periods), potentially indicating increased policy coordination by central banks in the recent period.
Recommended Citation
Barkoulas, John, Anthony G. Barilla, William Wells.
2016.
"Long-Memory Exchange Rate Dynamics in the Euro Era."
Chaos, Solitons and Fractals, 86: 92-100.
doi: 10.1016/j.chaos.2016.02.007
https://digitalcommons.georgiasouthern.edu/econ-facpubs/96
