Testing for fractional integration in SADC real exchange rates

Loading...
Thumbnail Image

Authors

Mokoena, Thabo Mishack

Journal Title

Journal ISSN

Volume Title

Publisher

University of Pretoria, Department of Economics

Abstract

This paper utilises “a class test for fractional integration” associated with the seminal contribution of Hinich and Chong (2007) to appraise the possibility that South African Development Community (SADC) real exchange rates can be treated as long memory processes. The justification for considering fractional integration is that the general failure to reject the unit-root hypothesis in real exchange rates is caused by the restrictiveness of standard unit-root tests regarding admissible low-frequency dynamic behaviour. The paper presents evidence that a majority of SADC real exchange rates are fractionally integrated and therefore mean-reverting.

Description

Keywords

Long memory processes, Real exchange rates, Mean-reversion, Southern African Development Community

Sustainable Development Goals

Citation

Mokoena, T, Gupta, R & Van Eyden, R 2008, 'Testing for fractional integration in SADC real exchange rates', University of Pretoria, Department of Economics, Working paper series, no. 2008-11. [http://web.up.ac.za/default.asp?ipkCategoryID=736&sub=1&parentid=677&subid=729&ipklookid=3]