Long memory and nonlinear mean reversion in Japanese yen-based real exchange rates

Journal of International Money and Finance

Volumn 20, Issue 1, 2001, Pages 115-132

  Cheung, Yin Wong ^a   Lai, Kon S ^b  

^a UNIVERSITY OF CALIFORNIA   (United States)

^b CALIFORNIA STATE UNIVERSITY   (United States)

Author keywords

Amplified shock response; F31; F41; Long swings; Long memory dynamics; Non monotonic mean reversion; Purchasing power parity

Indexed keywords

EID: 0042761977     PISSN: 02615606     EISSN: None     Source Type: Journal    
DOI: 10.1016/S0261-5606(00)00037-1     Document Type: Article

References (44)

1. Abuaf N., Jorion P. Purchasing power parity in the long run. Journal of Finance. 45:1990;157-174.
2. Banerjee A., Lumsdaine R.L., Stock J.H. Recursive and sequential tests of the unit-root and trend-break hypotheses: theory and international evidence. Journal of Business and Economic Statistics. 10:1992;271-287.
3. Campbell J.Y., Mankiw N.G. Are output fluctuations transitory? Quarterly Journal of Economics. 102:1987;857-880.
4. Cheung Y.W. Test for fractional integration: a Monte Carlo investigation. Journal of Time Series Analysis. 14:1993;331-345.
5. Cheung Y.W., Lai K.S. A fractional cointegration analysis of purchasing power parity. Journal of Business and Economic Statistics. 11:1993;103-112.
6. Cheung Y.W., Lai K.S. Lag order and critical values of the augmented Dickey-Fuller test. Journal of Business and Economic Statistics. 13:1995;277-280.
7. Cheung Y.W., Lai K.S. Parity reversion in real exchange rates during the post-Bretton Woods period. Journal of International Money and Finance. 17:1998;597-614.
8. Cheung Y.W., Lai K.S. On cross-country differences in the persistence of real exchange rates. Journal of International Economics. 50:2000;375-397.
9. Cheung, Y.W., Lai, K.S. 2001. On the purchasing power parity puzzle. Journal of International Economics, in press.
10. Diebold F.X., Husted S., Rush M. Real exchange rates under the gold standard. Journal of Political Economy. 99:1991;1252-1271.
11. Dornbusch R. Expectations and exchange rate dynamics. Journal of Political Economy. 84:1976;1161-1176.
12. Eichenbaum M., Evans C.L. Some empirical evidence on the effects of shocks to monetary policy on exchange rates. Quarterly Journal of Economics. 110:1995;975-1009.
13. Engle C., Hamilton J.D. Long swings in the dollar: are they in the data and do markets know it? American Economic Review. 80:1990;689-713.
14. Engel C., Hendrickson M.K., Rogers J.H. Intranational, intracontinental, and intraplanetary PPP. Journal of the Japanese and International Economies. 11:1997;480-501.
15. Fox R., Taqqu M.S. Large-sample properties of parameter estimates for strongly dependent stationary Gaussian time series. Annual of Statistics. 14:1986;517-532.
16. Frankel J.A., Froot K.A. Chartists, fundamentalists, and trading in the foreign exchange market. American Economic Review. 80:1990;181-185.
17. Frankel J.A., Froot K.A. Understanding the U.S. dollar in the eighties: the expectations of chartists and fundamentalists. Frankel J.A. On Exchange Rates. 1993;The MIT Press, Cambridge, MA.
18. Frankel J.A., Rose A.K. A panel project on purchasing power parity: mean reversion within and between countries. Journal of International Economics. 40:1996;209-224.
19. Froot K.A., Rogoff K. Perspectives on PPP and long-run real exchange rates. Grossman G., Rogoff K. Handbook of International Economics. vol. 3:1995;1647-1688 North-Holland, New York.
20. Granger C.W.J., Joyeux R. An introduction to long-memory time series models and fractional differencing. Journal of Time Series Analysis. 1:1980;15-39.
21. Hosking J.R.M. Fractional differencing. Biometrika. 68:1981;165-176.
22. Jorion P., Sweeney R.J. Mean reversion in real exchange rates: evidence and implications for forecasting. Journal of International Money and Finance. 15:1996;535-550.
23. Kaen F.R., Rosenman R.E. Predictable behavior in financial markets: some evidence in support of Heiner's hypothesis. American Economic Review. 76:1986;212-220.
24. Koedijk K.G., Schotman P.C., Van Dijk M.A. The re-emergence of PPP in the 1990s. Journal of International Money and Finance. 17:1998;51-61.
25. Lothian J.R. A century plus of yen exchange rate behavior. Japan and the World Economy. 2:1990;47-70.
26. Lothian J.R. Some new stylized facts of floating exchange rates. Journal of International Money and Finance. 17:1998;29-39.
27. Lothian J.R., Taylor M.P. Real exchange rate behavior: the recent float from the perspective of the past two centuries. Journal of Political Economy. 104:1996;488-509.
28. Lothian J.R., Taylor M.P. Real exchange rate behavior. Journal of International Money and Finance. 16:1997;945-954.
29. Mandelbrot B.B. Statistical methodology for nonperiodic cycles: from the covariance to R/S analysis. Annals of Economic and Social Measurement. 1:1972;259-290.
30. Mandelbrot B.B. The Fractal Geometry of Nature. 1977;Freeman, New York.
31. O'Connell P.G.J. The overvaluation of purchasing power parity. Journal of International Economics. 44:1998;1-19.
32. Oh K.-Y. Purchasing power parity and unit root tests using panel data. Journal of International Money and Finance. 15:1996;405-418.
33. Papell D.H. Searching for stationarity: purchasing power parity under the current float. Journal of International Economics. 43:1997;313-332.
34. Papell, D.H., 1998. The great appreciation, the great depression, and the purchasing power parity hypothesis. Discussion paper, University of Houston.
35. Papell D.H., Theodoridis H. Increasing evidence of purchasing power parity over the current float. Journal of International Money and Finance. 17:1998;41-50.
36. Papell, D.H., Theodoridis, H. 1998b. The choice of numeraire currency in panel tests of purchasing power parity. Discussion paper, University of Houston.
37. Rogoff K. The purchasing power parity puzzle. Journal of Economic Literature. 34:1996;647-668.
38. Sarno L., Taylor M.P. Real exchange rates under the recent float: unequivocal evidence of mean reversion. Economics Letters. 60:1998;131-137.
39. Taylor, M.P., Peel, D.A., Sarno, L., 1999. Nonlinear mean-reversion in real exchange rates: towards a solution to the purchasing power parity puzzles. Discussion paper, University of Oxford.
40. Taylor M.P., Sarno L. The behavior of real exchange rates during the post-Bretton Woods period. Journal of International Economics. 46:1998;281-312.
41. Vogelsang T.J., Perron P. Additional tests for a unit root allowing for a break in the trend function at the unknown time. International Economic Review. 39:1998;1073-1100.
42. Wei, S.-J., Parsley, D.C., 1995. Purchasing power disparity during the floating rate period: exchange rate volatility, trade barriers and other culprits. NBER Working Paper No. 5032.
43. Wu Y. Are real exchange rates nonstationary? Evidence from a panel-data test. Journal of Money Credit and Banking. 28:1996;54-63.
44. Zivot E., Andrews D.W.K. Further evidence on the Great Crash, the oil-price shock, and the unit-root hypothesis. Journal of Business and Economic Statistics. 10:1992;251-270.