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Journal of Economic Theory and Econometrics
JETEM/계량경제학보/計量經濟學報/JKES
Journal of the Korean Econometric Society

The Dynamics of Nominal Exchange Rates in a Fractional Cointegration Model

Vol.17, No.2, June , 79–105



  •   (Department of Economics, Ewha Womans University)

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Abstract  

This paper introduces an efficient estimation for fractional cointegration models which capture long run economic equilibrium relationships while allowing for a wider range of mean reverting behavior than standard cointegration analysis. The Fully-Modified method which is suggested in Phillips and Hansen (1991) can be applicable to fractional cointegration models to reduce second order biases. The comovement of nominal exchange rates is analyzed in a fractional cointegration models. Exchange rates dynamics are estimated by the efficient estimation method. Empirical results based on data for the 1957-1997 period show that there exists a cointegration relationship in a group of exchange rates.


Keywords
   Fractional Cointegration, Long Memory, Long Run Equilibrium, Cointegrating Vector, Exchange Rate Dynamics

JEL classification codes
   C22
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