An Examination of the Short-Term and Long-Term Behavior of Foreign Exchange Rates

Ming-Shiun Pan, Y Angela Liu and Hamid Bastin

The Financial Review, 1996, vol. 31, issue 3, 603-22

Abstract: This study employs the heteroskedasticity-robust variance ratio test and the modified rescaled range analysis to examine the short-term and long-term behavior of foreign exchange rates. The empirical results suggest that four of the five weekly nominal exchange rates examined exhibit short-term dependence. Further, there is evidence of long-term dependence in the nominal exchange rate series. The results also indicate that the real exchange rates generally exhibit short-term independence and the lack of strong evidence in favor of long-term dependence in real exchange rates indicates that the purchasing power parity may not hold in the long run. Copyright 1996 by MIT Press.

Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:bla:finrev:v:31:y:1996:i:3:p:603-22

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