Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67503
Authors: 
Bettendorf, Timo
Chen, Wenjuan
Year of Publication: 
2012
Series/Report no.: 
School of Business & Economics, Discussion Paper: Economics, Freie Universität Berlin 2012/21
Abstract: 
There has been mixed evidence regarding the existence of rational bubbles in the foreign exchange markets. Standard unit root and cointegration tests are criticized for their low power to detect rational bubbles that periodically collapse. This paper introduces recently developed sequential unit root tests into the analysis of exchange rates bubbles. Our results show that explosiveness in the nominal Sterling-dollar exchange rates is fully explained by the relative prices of traded goods.
Subjects: 
exchange rates
rational bubbles
sequential unit root test
JEL: 
C1
F3
Document Type: 
Working Paper

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