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Long swings in the Canadian dollar

Author

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  • Karl Pinno
  • Apostolos Serletis

Abstract

This paper uses daily, monthly, and quarterly observations for the Canadian dollar - US dollar nominal exchange rate over the recent flexible exchange rate period (from 2 January 1973 to 11 June 2004), and a new statistical model of exchange rate dynamics, developed by Engel and Hamilton to test the null hypothesis that the value of the Canadian dollar is characterized by long swings (i.e. it moves in one direction for long periods of time). Results indicate that only with quarterly data does the segmented trends model outperfom the random walk model. In fact, the performance of the segmented trends model declines as the frequency of the data increases, suggesting that at higher frequencies the segmented trends model has a more difficult time in distinguishing trends.

Suggested Citation

  • Karl Pinno & Apostolos Serletis, 2005. "Long swings in the Canadian dollar," Applied Financial Economics, Taylor & Francis Journals, vol. 15(2), pages 73-76.
    • Handle: RePEc:taf:apfiec:v:15:y:2005:i:2:p:73-76
    DOI: 10.1080/0960310042000282292
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    References listed on IDEAS

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    1. Engel, Charles, 1994. "Can the Markov switching model forecast exchange rates?," Journal of International Economics, Elsevier, vol. 36(1-2), pages 151-165, February.
    2. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    3. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-430, March.
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