Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316510 
Authors: 
Year of Publication: 
2016
Citation: 
[Journal:] East Asian Economic Review (EAER) [ISSN:] 2508-1667 [Volume:] 20 [Issue:] 3 [Year:] 2016 [Pages:] 365-390
Publisher: 
Korea Institute for International Economic Policy (KIEP), Sejong-si
Abstract: 
This paper quantitatively compares the intrinsic features of the daily USD-GBP exchange rates in two different periods, the 1920s and the 2010s, under the same freely floating exchange rate system. Even though the foreign exchange markets in the 1920s seem to be much less organized and developed than in the 2010s, this paper finds that both the long memory volatility property and the structural break appear to be the common intrigue features of the exchange rates in the two periods by using the FIGARCH model. In particular, the long memory volatility properties in the two periods are found to be upward biased and overstated because of the structural breaks in the exchange markets. Thus this paper applies the Adaptive-FIGARCH model to consider the long memory volatility property and the structural breaks jointly. The main finding is that the structural breaks in the exchange markets affect the long memory volatility property significantly in the two periods but the degree of the long memory volatility property in the 1920s is reduced more remarkably than in the 2010s after the structural breaks are accounted for; thus implying that the structural breaks in the foreign exchange markets in the 1920s seem to be more significant.
Subjects: 
The 1920s
Daily USD-GBP Exchange Rates
Long Memory Volatility Property
Structural Breaks
FIGARCH Model
Adaptive FIGARCH Model
JEL: 
C22
E44
F31
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article

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