Long Memory in Foreign Exchange Rates Revisited

J. OF INTERNATIONAL FINANCIAL MARKETS, INSTITUTIONS & MONEY, Vol. 5(2/3), 1995

Posted: 24 Jul 1998

See all articles by Rolf Tschernig

Rolf Tschernig

University of Regensburg - Department of Economics and Econometrics; Maastricht University - Department of Quantitative Economics

Abstract

There has been recent evidence for long memory in the changes of foreign exchange spot rates that is captured by the fractionally integrated ARMA model. This paper extends these investigations in several directions. First, the estimation procedure allows for GARCH errors. Second, in addition to the total period from 1973 to 1990 three subperiods are analyzed. Third, for the US-Dollar spot rates of the Deutsche Mark and the Swiss Franc ARFIMA model selection and estimation results for various observation frequencies are compared to ARFIMA specifications and their parameter values that are obtained from temporal aggregation. As a result the evidence for weak long memory in the changes of US-Dollar exchange rates is confirmed. However, long memory appears to be a property attached to the US currency since the analysis of the Deutsche Mark/Swiss Franc spot rate changes does not reveal any long memory.

JEL Classification: G15

Suggested Citation

Tschernig, Rolf, Long Memory in Foreign Exchange Rates Revisited. J. OF INTERNATIONAL FINANCIAL MARKETS, INSTITUTIONS & MONEY, Vol. 5(2/3), 1995, Available at SSRN: https://ssrn.com/abstract=6969

Rolf Tschernig (Contact Author)

University of Regensburg - Department of Economics and Econometrics ( email )

Universitaetsstrasse 31
D-93040 Regensburg
Germany
+49 (0) 941 943 2737 (Phone)
+49 (0) 941 943 4917 (Fax)

HOME PAGE: www.wiwi.uni-regensburg.de/tschernig

Maastricht University - Department of Quantitative Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

HOME PAGE: www.personeel.unimaas.nl/r.tschernig

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