Fractional integration of nominal exchange rates: evidence from CEECs in the light of EMU enlargement

Barros, Carlos P, Gil-Alana, Luis and Matousek, Roman (2011) Fractional integration of nominal exchange rates: evidence from CEECs in the light of EMU enlargement. Review of International Economics, 19 (1). pp. 77-92. ISSN 0965-7576

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Abstract

This paper uses fractional integration models to describe the long-run dependence of nominal exchange rates in Central and Eastern European countries (CEECs). The analysis is validated using nonparametric, semiparametric and parametric techniques. From comparing the results across the three approaches, it was clear that mean reversion takes places only for the euro exchange rates in Bulgaria, Estonia, and Slovenia. Other exchange rates based on the euro also display mean reversion with the parametric methods. For the US dollar rates, the unit-root null hypothesis cannot be rejected in any single country, indicating that shocks affecting the exchange rates against the US dollar are of a permanent nature, while those directed against the euro are less persistent, and tend sometimes to disappear in the long run. Policy implications are derived.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences > HG Finance > HG3810 Foreign exchange. International finance. International monetary system
Depositing User: Roman Matousek
Date Deposited: 20 Sep 2012 09:39
Last Modified: 20 Sep 2012 09:39
URI: http://sro.sussex.ac.uk/id/eprint/40760
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