Long memory and volatility dynamics in the US dollar exchange rate

Arbeitspapier

This paper focuses on nominal exchange rates, specifically the US dollar rate vis-à-vis the Euro and the Japanese Yen at a daily frequency. We model both absolute values of returns and squared returns using long-memory techniques, being particularly interested in volatility modelling and forecasting given their importance for FOREX dealers. Compared with previous studies using a standard fractional integration framework such as Granger and Ding (1996), we estimate a more general model which allows for dependence not only at the zero but also at other frequencies. The results show differences in the behaviour of the two series: a long-memory cyclical model and a standard I(d) model seem to be the most appropriate for the US dollar rate vis-à-vis the Euro and the Japanese Yen respectively.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 975

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Economic Growth and Aggregate Productivity: General
• Subject: Fractional integration ; long memory ; exchange rates ; volatility ; Wechselkurs ; US-Dollar ; Volatilität ; Zeitreihenanalyse ; Kapitalertrag ; Schätzung ; USA ; EU-Staaten ; Japan

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Caporale, Guglielmo Maria ; Gil-Alana, Luis A.
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/36756
• Last update: 10.03.2025, 11:42 AM CET