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Efficiency Of Foreign Exchange Markets: A Developing Country Perspective

  • Guneratne Banda Wickremasinghe

    (Monash University)

This study tests weak and semi-strong form efficiency of the foreign exchange market in Sri Lanka using six bilateral foreign exchange rates during the recent float. Weak-form efficiency is examined using unit root tests while semi-strong form efficiency is tested using co- integration and Granger causality tests and variance decomposition analysis. Results indicate that the Sri Lankan foreign exchange market is consistent with the weak -form of the Efficient Market Hypothesis. However, the results provide evidence against the semi - strong version of the Efficient Market hypothesis. These results have important implications for government policy makers and participants in the foreign exchange market of Sri Lanka.

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File URL: http://econwpa.repec.org/eps/if/papers/0406/0406004.pdf
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Paper provided by EconWPA in its series International Finance with number 0406004.

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Length: 24 pages
Date of creation: 16 Jun 2004
Date of revision:
Handle: RePEc:wpa:wuwpif:0406004
Note: Type of Document - pdf; pages: 24
Contact details of provider: Web page: http://econwpa.repec.org

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