Testing for Fractional Integration in SADC Real Exchange Rates

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Testing for Fractional Integration in SADC Real Exchange Rates

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)

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Rangan Gupta

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 a majority of SADC real exchange rates are fractionally integrated and therefore mean-reverting.

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

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Length: 7 pages
Date of creation: Jun 2008
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Handle: RePEc:pre:wpaper:200811

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Find related papers by JEL classification:
F31 - International Economics - - International Finance - - - Foreign Exchange

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-06-27 (All new papers)
NEP-IFN-2008-06-27 (International Finance)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June. [Downloadable!] (restricted)
Diebold, Francis X. & Rudebusch, Glenn D., 1991. "On the power of Dickey-Fuller tests against fractional alternatives," Economics Letters, Elsevier, vol. 35(2), pages 155-160, February. [Downloadable!] (restricted)
Other versions:
- Francis X. Diebold & Glenn D. Rudebusch, 1990. "On the power of Dickey-Fuller tests against fractional alternatives," Finance and Economics Discussion Series 119, Board of Governors of the Federal Reserve System (U.S.).
Melvin Hinich & Terence Chong, 2007. "A Class Test for Fractional Integration," Studies in Nonlinear Dynamics & Econometrics, Berkeley Electronic Press, vol. 11(2), pages 1382-1382. [Downloadable!] (restricted)

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This page was last updated on 2008-8-28.

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