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Random Walk Components in Output and Exchange Rates: Some Robust Tests on UK Data

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  • Mills, Terence C
  • Taylor, Mark P

Abstract

This paper uses robust tests for unit roots to determine whether U.K. output and exchange rate data contain random walk components. It finds that, as for the United States, there is no evidence to reject a unit root in output for post-World War II data, but there is evidence to suggest that the hypothesis can be rejected for the pre-World War I era. Evidence is also presented in support of the random walk behavior of spot exchange rates, based on analyzing data sampled at hour intervals around known news events, such as the Louvre Accourd and the 1987 general election. Copyright 1989 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Suggested Citation

  • Mills, Terence C & Taylor, Mark P, 1989. "Random Walk Components in Output and Exchange Rates: Some Robust Tests on UK Data," Bulletin of Economic Research, Wiley Blackwell, vol. 41(2), pages 123-135, April.
    • Handle: RePEc:bla:buecrs:v:41:y:1989:i:2:p:123-35
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    Cited by:

    1. Franco Bevilacqua & Adriaan van Zon, 2004. "Random walks and non-linear paths in macroeconomic time series: some evidence and implications," Chapters, in: John Foster & Werner Hölzl (ed.), Applied Evolutionary Economics and Complex Systems, chapter 3, Edward Elgar Publishing.
    2. Crafts, N.F.R. & Mills, T.C., 1990. "British Economic Fluctuations, 1851-1913: A Perspective Based On Growth Theory," The Warwick Economics Research Paper Series (TWERPS) 362, University of Warwick, Department of Economics.
    3. AuYong, Hue Hwa & Gan, Christopher & Treepongkaruna, Sirimon, 2004. "Cointegration and causality in the Asian and emerging foreign exchange markets: Evidence from the 1990s financial crises," International Review of Financial Analysis, Elsevier, vol. 13(4), pages 479-515.
    4. Mills, Terence C, 1994. "Infrequent Permanent Shocks and the Unit Root in Quarterly UK Output," Bulletin of Economic Research, Wiley Blackwell, vol. 46(1), pages 91-94, January.

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