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Long-term dependence in exchange rates

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  • A. Karytinos
  • A. S. Andreou
  • G. Pavlides

Abstract

The extent to which exchange rates of four major currencies against the Greek Drachma exhibit long-term dependence is investigated using a R / S analysis testing framework. We show that both classic R / S analysis and the modified R / S statistic if enhanced by bootstrapping techniques can be proven very reliable tools to this end. Our findings support persistence and long-term dependence with non-periodic cycles for the Deutsche Mark and the French Franc series. In addition a noisy chaos explanation is favored over fractional Brownian motion. On the contrary, the US Dollar and British Pound were found to exhibit a much more random behavior and lack of any long-term structure.

Suggested Citation

  • A. Karytinos & A. S. Andreou & G. Pavlides, 2000. "Long-term dependence in exchange rates," Discrete Dynamics in Nature and Society, Hindawi, vol. 4, pages 1-20, January.
    • Handle: RePEc:hin:jnddns:637682
    DOI: 10.1155/S1026022600000017
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