Long swings in the Canadian dollar

Karl Pinno and Apostolos Serletis

Applied Financial Economics, 2005, vol. 15, issue 2, 73-76

Abstract: This paper uses daily, monthly, and quarterly observations for the Canadian dollar - US dollar nominal exchange rate over the recent flexible exchange rate period (from 2 January 1973 to 11 June 2004), and a new statistical model of exchange rate dynamics, developed by Engel and Hamilton to test the null hypothesis that the value of the Canadian dollar is characterized by long swings (i.e. it moves in one direction for long periods of time). Results indicate that only with quarterly data does the segmented trends model outperfom the random walk model. In fact, the performance of the segmented trends model declines as the frequency of the data increases, suggesting that at higher frequencies the segmented trends model has a more difficult time in distinguishing trends.

Date: 2005
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DOI: 10.1080/0960310042000282292

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