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Does the Australian Dollar Real Exchange Rate Really Display Mean Reversion?

Author

Listed:
  • Henry, O.

Abstract

Non-stationarity of the real exchange rate is inconsistent with purchasing power parity as a long run equilibrium. This paper applies parametric and non-parametric techniques to data from a trade weighted index to analyse the time series properties of Australia's real exchange rate. In contrast to recent work by Olekalns amd Wilkins (1998) we conclude that shocks to the real exchange rate are infinitely persistent.

Suggested Citation

  • Henry, O., 1998. "Does the Australian Dollar Real Exchange Rate Really Display Mean Reversion?," Department of Economics - Working Papers Series 616, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:616
    as

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    More about this item

    Keywords

    EXCHANGE RATE ; PURCHASING POWER;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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