Random walk and structural break in exchange rates
by Kenneth A. Tah
International Journal of Monetary Economics and Finance (IJMEF), Vol. 11, No. 4, 2018

Abstract: In this paper, our goal is to examine whether foreign exchange rate between the US and her largest trading partners (China, Canada, Mexico, Japan, Europe, South Korea, UK, India and Taiwan) follow random-walk or mean-reversion processes in the presence of sudden and gradual structural break. Our tests endogenously determined the structural swing and are more powerful than the traditional unit root tests. In all foreign exchange rates, we find strong evidence for structural breaks. Moreover, the results are consistent with the random-walk hypothesis for all trading partners except China. After due allowance is made for structural break, the Chinese yuan against the US dollar violate the random walk hypothesis.

Online publication date: Fri, 19-Oct-2018

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Monetary Economics and Finance (IJMEF):
Login with your Inderscience username and password:

    Username:        Password:         

Forgotten your password?


Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com