Half-lives of currencies and aggregation bias

Michael Kunkler and Ronald MacDonald

Economics Letters, 2015, vol. 135, issue C, 58-60

Abstract: We revisit the exchange rate half-life issue and demonstrate that observed half-lives can be reduced significantly by modelling (relative) currency rates, rather than exchange rates. We show that the average observed half-life for relative currency rates, around a measure of central tendency, is about 1.55 years and this drops to 1.30 years when the US dollar is excluded. We also show that a standard exchange rate model exhibits aggregation bias.

Keywords: Half-lives; Exchange rates; Aggregation bias (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:135:y:2015:i:c:p:58-60

DOI: 10.1016/j.econlet.2015.07.030

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