Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/36756
Authors: 
Caporale, Guglielmo Maria
Gil-Alana, Luis A.
Year of Publication: 
2010
Series/Report no.: 
DIW Discussion Papers 975
Abstract: 
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.
Subjects: 
Fractional integration
long memory
exchange rates
volatility
JEL: 
C22
O40
Document Type: 
Working Paper

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