Testing for Fractional Integration in SADC Real Exchange Rates

Thabo Mokoena (), Rangan Gupta () and Renee Van Eyden ()
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Thabo Mokoena: South African Reserve Bank, Pretoria
Renee Van Eyden: Department of Economics, University of Pretoria

No 200811, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper utilises “a class test for fractional integration” associated with the seminal contribution of Hinich and Chong (2007) to appraise the possibility that South African Development Community (SADC) real exchange rates can be treated as long memory processes. The justification for considering fractional integration is that the general failure to reject the unit-root hypothesis in real exchange rates is caused by the restrictiveness of standard unit-root tests regarding admissible low-frequency dynamic behaviour. The paper presents evidence that, except for South Africa, none of the SADC real exchange rates are fractionally integrated. However, the results are found to be sensitive to the size of the sample.

Keywords: Long Memory Processes; Real Exchange Rates; Mean-Reversion (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn
Date: 2008-06
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Persistent link: http://EconPapers.repec.org/RePEc:pre:wpaper:200811

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