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Title: |
Do Real Exchange Rates Follow Random Walks?: A
Heteroscedasticity-Robust Autocorrelation Test |
| Author: |
Liu, Christina
Y.; He, Jia |
| Author
Affiliation: |
Baruch College,
CUNY; DePaul U |
| Source: |
International Economic Journal, Autumn 1991, v. 5, no. 3, pp. 39-48 |
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Publication Date: |
Autumn 1991 |
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Abstract: |
A heteroscedasticity-consistent
variance-ratio test provides evidence rejecting the random walk
hypothesis, using ten pairs of monthly real exchange rate series over
the period from January 1974 to January 1989. The rejections cast doubt
on the support for "uncorrelated increment" in the real exchange rate,
which generally existed in the previous literature by adopting less
powerful test. Furthermore, since the increment on the real exchange
rate can be regarded as a measure of short-run deviations from PPP, the
autocorrelation results in this paper suggest that short-run deviations
from PPP may have a tendency to be reversed within a reasonably short
period of time. |
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