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The cointegration relationships among G-7 foreign exchange rates

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  • Kang, Heejoon

Abstract

A search method is applied to foreign exchange rates of G-7 countries, in terms of the US dollar, to estimate cointegration relationships. The method searches numerically, by strictly following the definition of the cointegration, a particular linear combination of nonstationary series in order to make it a stationary series. The list of those exchange rates which are cointegrated from the new method is very different from those derived from the conventional maximum likelihood estimation or ordinary least squares methods. The new method also provides confidence intervals for cointegration coefficients. From the confidence intervals, it is determined that certain G-7 currencies expressed in terms of the mark or the pound become stationary.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Financial Analysis.

Volume (Year): 17 (2008)
Issue (Month): 3 (June)
Pages: 446-460

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Handle: RePEc:eee:finana:v:17:y:2008:i:3:p:446-460

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Web page: http://www.elsevier.com/locate/inca/620166

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Cited by:
  1. Ciner, Cetin, 2011. "Information transmission across currency futures markets: Evidence from frequency domain tests," International Review of Financial Analysis, Elsevier, vol. 20(3), pages 134-139, June.

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