Long memory in Indian exchange rates: an application of power-law scaling analysis

Dilip Kumar and S. Maheswaran

Macroeconomics and Finance in Emerging Market Economies, 2015, vol. 8, issue 1-2, 90-107

Abstract: This article studies the power-law scaling properties of Indian exchange rates relative to US dollar, British pound, Euro and Japanese yen and measures the evolution of their long-memory phenomenon. We apply the generalized Hurst exponent (GHE) approach for the computation of the scaling exponent. This article also tests the accuracy of the GHE approach by means of Monte Carlo experiments. The Monte Carlo experiments indicate that the GHE approach provides good estimates of the Hurst exponent. We also find that the efficiency characteristics of Indian exchange rates and their stages of development are dynamic in nature.

Date: 2015
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DOI: 10.1080/17520843.2014.940987

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