Resource title

Exchange rates and Markov switching dynamics

Resource image

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Resource description

This article presents a systematic and extensive empirical study on the presence of Markov switching dynamics in three dollar-based exchange rates. A Monte Carlo approach is adopted to circumvent the statistical inference problem inherent to the test of regime-switching behavior. Two data frequencies, two sample periods, and various specifications are considered. Quarterly data yield inconclusive evidence - the test rejects neither random walk nor Markov switching. Monthly data, on the other hand, offer unambiguous evidence of the presence of Markov switching dynamics. The results suggest that data frequency, in addition to sample size, is crucial for determining the number of regimes.

Resource author

Yin-Wong Cheung, Ulf G. Erlandsson

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/18711

Resource license

Adapt according to the presented license agreement and reference the original author.