| By: |
Derek Bond (University of Ulster);
Michael J. Harrison (University College Dublin);
Edward J. O'Brien (European Central Bank) |
| Abstract: |
Deciding whether a time series that appears nonstationary is in fact
fractionally integrated or subject to structural change is a difficult task.
However, various tests have recently been introduced for distinguishing long
memory from level shifts and nonlinearity. In this paper, three testing
approaches based on the properties of semiparametric estimators of the
fractional differencing parameter, d, are described and applied to the (log)
Ireland-United Kingdom and Ireland-Germany real exchange rates. The two
exchange rates behave quite differently over time and the new tests give
different results for each; but overall the results provide fairly strong
support for the possibility of nonlinearity rather than long memory. |
| Keywords: |
Fractional integration, long memory, nonlinearity, real exchange rates, struc- tural change |
| JEL: |
C22 C51 F31 |
| Date: |
2009–01–19 |
| URL: |
http://d.repec.org/n?u=RePEc:ucn:wpaper:200901&r=ets |