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In the long run, we're all mean reverting - Wavelet analysis on the fate of real exchange rates

Berger, David LU (2013) NEKP01 20131
Department of Economics
Abstract
This paper analyzes to what extent PPP holds in the long run. Firstly, standard unit root tests are used to test for stationarity. These results are then compared to the ones provided by a wavelet based OLS and an approximate ML estimator. Using these to determine the integration order of an ARFIMA(p,d,q) process, the results support the PPP hypothesis and
indicate that real exchange rates are mean reverting and subject to long swings. Unit root tests are therefore inept for analyzing real exchange rates.
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author
Berger, David LU
supervisor
organization
course
NEKP01 20131
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Purchasing Power Parity, Long Run Memory, ARFIMA(p, d, q), Unit root tests, Wavelets
language
English
id
3920433
date added to LUP
2013-07-24 12:29:42
date last changed
2013-07-24 12:29:42
@misc{3920433,
  abstract     = {This paper analyzes to what extent PPP holds in the long run. Firstly, standard unit root tests are used to test for stationarity. These results are then compared to the ones provided by a wavelet based OLS and an approximate ML estimator. Using these to determine the integration order of an ARFIMA(p,d,q) process, the results support the PPP hypothesis and
indicate that real exchange rates are mean reverting and subject to long swings. Unit root tests are therefore inept for analyzing real exchange rates.},
  author       = {Berger, David},
  keyword      = {Purchasing Power Parity,Long Run Memory,ARFIMA(p,d,q),Unit root tests,Wavelets},
  language     = {eng},
  note         = {Student Paper},
  title        = {In the long run, we're all mean reverting - Wavelet analysis on the fate of real exchange rates},
  year         = {2013},
}