scholarly journals Empirical evidence against the exchange rate anomaly: the Australian case

2006 ◽  
Vol 36 (2) ◽  
pp. 237-250 ◽  
Author(s):  
Luis A. Gil-Alana
Keyword(s):  
Exchange Rate ◽  
Unit Root ◽  
Long Memory ◽  
Fractional Integration ◽  
Forward Rate ◽  
Spot Rate ◽  
Forward Rates ◽  
Widespread Agreement ◽  
Integration Techniques ◽  
Australian Case

Though there is widespread agreement that the logarithmic spot and forward rates are both integrated of order one (I(1)) variables, so that their corresponding returns are I(0) stationary, it has been recently claimed that they may be long memory. In this article, we examine this hypothesis by means of fractional integration techniques. The results based on parametric and semiparametric tests show that though fractional degrees of integration are plausible alternatives, the confidence intervals include the unit root case in both series. In addition, the hypothesis of unbiasedness of the forward rate as a forecaster for the future spot rate cannot be rejected for the Australian daily exchange rate market.

scholarly journals Future Spot Rate: The Implications in Indonesia

2020 ◽  
Vol 20 (1) ◽  
pp. 155
Author(s):  
R Adisetiawan ◽  
Pantun Bukit ◽  
Ahmadi Ahmadi
Keyword(s):  
Time Series ◽  
Exchange Rate ◽  
Exchange Rates ◽  
Empirical Evidence ◽  
Forward Rate ◽  
Spot Rate ◽  
Forward Rates ◽  
Currency Exchange ◽  
Short Period ◽  
The Exchange Rate

Investors, multinational companies and governments require a rate forecasting to make informed decisions about the hedging of debts and receivables, funding and short-term investments, capital budgeting and long-term financing. The process of making forecasting from market indicators, known as market-based forecasting, is usually developed based on spot rates and forward rates. The current spot rate can be used as forecasting, as the exchange rate reflects the market estimate of the spot rate in a short period of time. The forward rate is used in forecasting, as the exchange rate reflects the market estimate of the spot rate at the end of the forecasting period. Based on the research conducted by Chiang (1986) of the samples used, empirical evidence indicates spot rates and forward rates are significant as predictors of future spots. Empirical evidence suggests that spot rates provide better forecasting results compared to forward rates. The research uses regression models for market-based forecasting methods. The variables used in this study are spot rates, forward rates and future spots. The samples used are from Bank Indonesia for spot rates in January – March 2019 and future spot in April – June 2019, and from Jakarta Futures exchange for forward rates in January – March 2019. The Stochastic and Chow Test models are selected and their use has been evaluated using quality and precise testing measures. Based on the sample period used, empirical evidence suggests that spot rates and forward rates are significant in predicting future spots for EUR, JPY and AUD currencies. Current spot rates provide better forecasting results in predicting Future spot compared to the forward rate. Both the 15Ft">  and 15St">  coefficient are sensitive to new information from the variation of the coefficient and time, it can increase the forecasting of the equation to each currency exchange rate used. The study states that variables from time series should be effectively utilized and utilized in predicting currency exchange rates, as this research demonstrates the absence of dependence on time series Can be concluded that foreign exchange rates in each country follow a pattern that is not stationary. The spot Euro exchange rate turns out to be statistically more accurate with an error rate of 0.004144% forecasting with the value of regression coefficient of Euro exchange rate is a Future Spot = 21.504,88 – 0.341229Spot + 15et+1"> .

Carry Trade, Exchange Rates, and the Balance-of-Payments

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Nelson H. Barbosa-Filho
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Real Exchange Rate ◽  
Foreign Debt ◽  
Balance Of Payments ◽  
Forward Rate ◽  
Spot Rate ◽  
Financial Constraint ◽  
Carry Trade ◽  
The Real

Abstract This paper presents a partial equilibrium model that integrates interest rate arbitrage with the balance-of-payments constraint to determine the real exchange rate. The sequential logic is the following: (i) carry-trade determines the term premium, with the spot rate showing greater volatility than the forward rate, (ii) uncovered interest rate parity determines the spot rate based on the real exchange rate consistent with a financial constraint, defined as a stable ratio of foreign reserves to foreign debt; and (iii) the trade balance consistent with the financial constraint determines the long-run real exchange rate for a given ratio of domestic to foreign income.

scholarly journals Modelling International Monthly Tourist in Spain*

2020 ◽  
Vol 29 (3) ◽  
pp. 723-736
Author(s):  
Juncal Cuñado ◽  
Luis Alberiko Gil-Alana ◽  
Fernando Perez De Gracia
Keyword(s):  
Time Series ◽  
Long Memory ◽  
Fractional Integration ◽  
Structural Break ◽  
A Value ◽  
Integration Techniques ◽  
The Mean

This article investigates the degree of persistence in the international monthly tourist time series in Spain using long memory (fractional integration) techniques. Our findings can be summarized as follows. The two standard hypotheses of integer degrees of differentiation, i.e., the I(0) and the I(1) behaviour, are clearly rejected. The series is found to be I(d) with a value of d in the interval (0.421, 0.780) thus implying long memory behaviour and mean reverting behaviour. However, if a structural break is considered, it takes place at May 2007, and then, the two subsamples present orders of integration which are above 1 and thus rejecting the mean reverting hypothesis.

scholarly journals Time-varying persistence of inflation: evidence from a wavelet-based approach

2017 ◽  
Vol 21 (4) ◽  
Author(s):  
Heni Boubaker ◽  
Giorgio Canarella ◽  
Rangan Gupta ◽  
Stephen M. Miller
Keyword(s):  
Brownian Motion ◽  
Unit Root ◽  
Long Memory ◽  
Fractional Integration ◽  
Smooth Transition ◽  
Memory Model ◽  
Time Varying ◽  
Empirical Results ◽  
The Us ◽  
Smooth Transition Autoregressive

AbstractWe propose a new stochastic long-memory model with a time-varying fractional integration parameter, evolving non-linearly according to a Logistic Smooth Transition Autoregressive (LSTAR) specification. To estimate the time-varying fractional integration parameter, we implement a method based on the wavelet approach, using the instantaneous least squares estimator (ILSE). The empirical results show the relevance of the modeling approach and provide evidence of regime change in inflation persistence that contributes to a better understanding of the inflationary process in the US. Most importantly, these empirical findings remind us that a “one-size-fits-all” monetary policy is unlikely to work in all circumstances. The empirical results are consistent with newly developed tests of wavelet-based unit root and fractional Brownian motion.

scholarly journals Statistical Modeling of the Temperatures in the Northern Hemisphere Using Fractional Integration Techniques

2005 ◽  
Vol 18 (24) ◽  
pp. 5357-5369 ◽  
Author(s):  
Luis A. Gil-Alana
Keyword(s):  
Twentieth Century ◽  
Statistical Modeling ◽  
Northern Hemisphere ◽  
Long Memory ◽  
Serial Correlation ◽  
Fractional Integration ◽  
Testing Procedure ◽  
Integrated Process ◽  
Fractional Differencing ◽  
Integration Techniques

Abstract The temperatures in the Northern Hemisphere from 1854 to 1999 have been analyzed in this article by means of a testing procedure that permits one to consider fractional degrees of integration. The tests are valid under general forms of serial correlation and deterministic trends and do not require estimation of the fractional differencing parameter. The results show that the series follows a fractionally integrated process with the order of integration higher than zero and thus implying long memory behavior. The series was decomposed into four different subsamples, and it was observed that the degree of dependence between the observations substantially increased during the twentieth century.

scholarly journals Controllability and Persistence of Money Market Rates along the Yield Curve: Evidence from the Euro Area

2010 ◽  
Vol 11 (3) ◽  
pp. 367-380 ◽  
Author(s):  
Ulrike Busch ◽  
Dieter Nautz
Keyword(s):  
Interest Rates ◽  
Euro Area ◽  
Long Memory ◽  
European Central Bank ◽  
Yield Curve ◽  
Fractional Integration ◽  
Money Market ◽  
Communication Strategy ◽  
European Central ◽  
Integration Techniques

Abstract Controllability of longer-term interest rates requires that the persistence of their deviations from the central bank’s policy rate (i.e. the policy spreads) remains sufficiently low. This paper applies fractional integration techniques to assess the persistence of policy spreads of euro area money market rates along the yield curve. Independently from anticipated policy rate changes, there is strong evidence for all maturities that policy spreads exhibit long memory. We show that recent changes in the operational framework and the communication strategy of the European Central Bank (ECB) have significantly decreased the persistence of euro area policy spreads and, thus, have enhanced the ECB’s influence on longer-term money market rates.

scholarly journals Herd Behavior and Volatility Persistence in Bombay (Mumbai) Stock Exchange

2020 ◽  
Vol 6 ◽  
pp. 1
Author(s):  
Ibrahim A Onour ◽  
Keyword(s):  
Unit Root ◽  
Stock Price ◽  
Stock Exchange ◽  
Fractional Integration ◽  
Unit Root Tests ◽  
Herd Behavior ◽  
Rational Bubbles ◽  
Volatility Persistence ◽  
Integration Techniques ◽  
Q Model

This paper employs a combination of unit root tests and fractional integration techniques using the ARFIMA(p,d,q) model to test rational bubbles, which implies herd behavior, in Bombay Stock Exchange (BSE). The results in the paper strongly support the evidence of herd behavior in the daily, weekly, and monthly price aggregates. Moreover, the paper also investigates the degree of conditional volatility persistence using FIGARCH(p,d,q) specification to show that the persistence of shocks to stock price and dividend yield volatilities is short-termed.

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