nep-ets New Economics Papers
on Econometric Time Series
Issue of 2009‒01‒24
one paper chosen by
Yong Yin
SUNY at Buffalo

  1. Exploring Long Memory and Nonlinearity in Irish Real Exchange Rates using Tests based on Semiparametric Estimation By Derek Bond; Michael J. Harrison; Edward J. O'Brien

  1. By: Derek Bond (University of Ulster); Michael J. Harrison (University College Dublin); Edward J. O'Brien (European Central Bank)
    Abstract: Deciding whether a time series that appears nonstationary is in fact fractionally integrated or subject to structural change is a difficult task. However, various tests have recently been introduced for distinguishing long memory from level shifts and nonlinearity. In this paper, three testing approaches based on the properties of semiparametric estimators of the fractional differencing parameter, d, are described and applied to the (log) Ireland-United Kingdom and Ireland-Germany real exchange rates. The two exchange rates behave quite differently over time and the new tests give different results for each; but overall the results provide fairly strong support for the possibility of nonlinearity rather than long memory.
    Keywords: Fractional integration, long memory, nonlinearity, real exchange rates, struc- tural change
    JEL: C22 C51 F31
    Date: 2009–01–19

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