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Rescaled variance analysis of real exchange rates

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  • Ata Assaf

Abstract

The characterization of real exchange rate series as random in nature has been questioned in recent times by the application of new statistical tools. This study uses a new test proposed by Giraitis et al. (Journal of Econometrics, 112, pp. 265-9, 2003) and based on KPSS (Journal of Econometrics, 54, pp. 159-78, 1992) test. The rescaled variance (V/S) statistic is shown to have a simpler asymptotic distribution and achieve a better balance of size and power than Lo's (1991) and KPSS (1992) test. Application of the new test suggests that real exchange rate movements do not show evidence of long memory.

Suggested Citation

  • Ata Assaf, 2004. "Rescaled variance analysis of real exchange rates," Applied Economics Letters, Taylor & Francis Journals, vol. 11(5), pages 303-306.
  • Handle: RePEc:taf:apeclt:v:11:y:2004:i:5:p:303-306
    DOI: 10.1080/1350485042000221562
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    1. Sanjay Rajagopal, 2012. "A Study of the Returns Behavior of Small Capitalization REITs," Journal of Economics and Behavioral Studies, AMH International, vol. 4(8), pages 457-466.

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