Long Memory and Volatility Dynamics in the US Dollar Exchange Rate

Guglielmo Maria Caporale and Luis Gil-Alana

Multinational Finance Journal, 2012, vol. 16, issue 1-2, 105-136

Abstract: This paper focuses on nominal exchange rates, specifically the US dollar rate vis-a-vis the Euro and the Japanese Yen at a daily frequency. In the paper both absolute values of returns and squared returns are modelled using long-memory techniques, being particularly interested in volatility modelling and forecasting. Compared with previous studies using fractional integration such as Granger and Ding (1996), a more general model is estimated, which allows for dependence not only at the zero but also at other frequencies. The results show differences in the behaviour of the two series: a long-memory cyclical model and a standard I(1) model seem to be the most appropriate for the US dollar rate vis-a-vis the Euro and the Japanese Yen respectively.

Keywords: Fractional integration; Long memory; Exchange rates, Volatility (search for similar items in EconPapers)
JEL-codes: G22 O40 (search for similar items in EconPapers)
Date: 2012
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Related works:
Working Paper: Long Memory and Volatility Dynamics in the US Dollar Exchange Rate (2011)
Working Paper: Long Memory and Volatility Dynamics in the US Dollar Exchange Rate (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mfj:journl:v:16:y:2012:i:1-2:p:105-136

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