Non-monotonic long memory dynamics in black-market premia

Patrick K. Asea and Michael Dueker

No 1995-003, Working Papers from Federal Reserve Bank of St. Louis

Abstract: The dynamic response of Black market premia to domestic shocks is an important issue in the design and implementation of stabilization and reform programs. We use a vector autoregressive fractionally integrated model to provide new evidence on the dynamics of the official and Black market exchange rates. We show that the official and Black market exchange rates in Hungary are cointegrated with a negative fractional order ofintegration in the cointegrating residuals. The new empirical finding means that the cointegrating residuals are positively autocorrelated in the short run due to autoregressive dynamics, but are negatively autocorrelated in the long run. The rich and complex dynamics of the premia suggests the existence of what we call long memory non-monotonicity.

Keywords: Foreign exchange rates; Vector autoregression (search for similar items in EconPapers)
Date: 1995
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://research.stlouisfed.org/wp/more/1995-003/ (application/pdf)
http://research.stlouisfed.org/wp/1995/95-003.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:1995-003

Ordering information: This working paper can be ordered from
subscribe@stls.frb.org

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis (scott.stlouis@stls.frb.org).