Exchange rates and Markov switching dynamics
(2005) In Journal of Business & Economic Statistics 23(3). p.314-320- Abstract
- This article presents a systematic and extensive empirical study on the presence of Markov switching dynamics in three dollar-based exchange rates. A Monte Carlo approach is adopted to circumvent the statistical inference problem inherent to the test of regime-switching behavior. Two data frequencies, two sample periods, and various specifications are considered. Quarterly data yield inconclusive evidence; the test rejects neither random walk nor Markov switching. Monthly data, on the other hand, offer unambiguous evidence of the presence of Markov switching dynamics. The results suggest that data frequency, in addition to sample size, is crucial for determining the number of regimes.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/209518
- author
- Cheung, Y W and Erlandsson, Ulf LU
- organization
- publishing date
- 2005
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- sampling, Monte Carlo test, regime switching, exchange rate dynamics, frequency
- in
- Journal of Business & Economic Statistics
- volume
- 23
- issue
- 3
- pages
- 314 - 320
- publisher
- American Statistical Association
- external identifiers
-
- wos:000235043100006
- scopus:22544463975
- ISSN
- 0735-0015
- DOI
- 10.1198/073500104000000488
- language
- English
- LU publication?
- yes
- id
- 0bff1127-e0f5-48c0-927d-cef23218a5e5 (old id 209518)
- date added to LUP
- 2016-04-01 12:27:30
- date last changed
- 2022-01-27 05:21:04
@article{0bff1127-e0f5-48c0-927d-cef23218a5e5, abstract = {{This article presents a systematic and extensive empirical study on the presence of Markov switching dynamics in three dollar-based exchange rates. A Monte Carlo approach is adopted to circumvent the statistical inference problem inherent to the test of regime-switching behavior. Two data frequencies, two sample periods, and various specifications are considered. Quarterly data yield inconclusive evidence; the test rejects neither random walk nor Markov switching. Monthly data, on the other hand, offer unambiguous evidence of the presence of Markov switching dynamics. The results suggest that data frequency, in addition to sample size, is crucial for determining the number of regimes.}}, author = {{Cheung, Y W and Erlandsson, Ulf}}, issn = {{0735-0015}}, keywords = {{sampling; Monte Carlo test; regime switching; exchange rate dynamics; frequency}}, language = {{eng}}, number = {{3}}, pages = {{314--320}}, publisher = {{American Statistical Association}}, series = {{Journal of Business & Economic Statistics}}, title = {{Exchange rates and Markov switching dynamics}}, url = {{http://dx.doi.org/10.1198/073500104000000488}}, doi = {{10.1198/073500104000000488}}, volume = {{23}}, year = {{2005}}, }