Long memory and nonlinear mean reversion in Japanese yen-based real exchange rates
Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review
Author(s)
Detail(s)
| Original language | English |
|---|---|
| Pages (from-to) | 115-132 |
| Journal / Publication | Journal of International Money and Finance |
| Volume | 20 |
| Issue number | 1 |
| Publication status | Published - Feb 2001 |
| Externally published | Yes |
Link(s)
Abstract
The extraordinary difficulty in uncovering parity reversion in yen-based real exchange rates has often been ascribed to a missing trend variable. This study identifies an alternative explanation and shows that the puzzling behavior of real yen rates may stem from long-memory dynamics, which undermine unit-root tests in their ability to detect mean reversion. The long-memory findings are consistent with the long swings in yen exchange rates during the current float. Further analysis also reveals evidence of non-monotonic reversion toward parity. © 2001 Elsevier Science Ltd.
Research Area(s)
- Amplified shock response, F31, F41, Long swings, Long-memory dynamics, Non-monotonic mean reversion, Purchasing power parity
Citation Format(s)
Long memory and nonlinear mean reversion in Japanese yen-based real exchange rates. / Cheung, Yin-Wong; Lai, Kon S.
In: Journal of International Money and Finance, Vol. 20, No. 1, 02.2001, p. 115-132.Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review
