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Testing for Fractional Integration in SADC Real Exchange Rates

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Author Info

  • Thabo Mokoena

    ()
    (South African Reserve Bank, Pretoria)

  • Rangan Gupta

    ()
    (Department of Economics, University of Pretoria)

  • Renee Van Eyden

    ()
    (Department of Economics, University of Pretoria)

Abstract

This paper utilises “a class test for fractional integration” associated with the seminal contribution of Hinich and Chong (2007) to appraise the possibility that South African Development Community (SADC) real exchange rates can be treated as long memory processes. The justification for considering fractional integration is that the general failure to reject the unit-root hypothesis in real exchange rates is caused by the restrictiveness of standard unit-root tests regarding admissible low-frequency dynamic behaviour. The paper presents evidence that, except for South Africa, none of the SADC real exchange rates are fractionally integrated. However, the results are found to be sensitive to the size of the sample.

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Bibliographic Info

Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200811.

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Length: 10 pages
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:pre:wpaper:200811

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Related research

Keywords: Long Memory Processes; Real Exchange Rates; Mean-Reversion;

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Cited by:
  1. Riane de Bruyn & Rangan Gupta & Lardo stander, 2011. "Testing the Monetary Model for Exchange Rate Determination in South Africa: Evidence from 101 Years of Data," Working Papers 201134, University of Pretoria, Department of Economics.
  2. Thabo M. Mokoena & Gupta, R. & Van Eyden, R., 2009. "Half-Life Deviations from PPP in the South African Development Community (SADC)," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 9(1).

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