Baillie, Richard T. and McMahon, Patrick C. (1989) The Foreign Exchange Market: Theory and Econometric Evidence, Cambridge University Press, Cambridge.  Home/Search   Document Not in Database   Summary   Related Articles   Check

....discussed extensively given its theoretical and practical implications, namely for the purchasing power parity hypothesis and for economic policy. In fact, it is usually accepted that one major implication of the purchasing power parity is that real exchange rates are mean stationary (see, e.g. Baillie and McMahon 1989). In contrast, if they follow a random walk or, in general, if they have an autoregressive unit root, then there is no equilibrium value to which the real exchange rate returns and present shocks are expected to become permanent deviations. Tests for the stationarity of real exchange rates have ....

Baillie, Richard T. and McMahon, Patrick C. (1989) The Foreign Exchange Market: Theory and Econometric Evidence, Cambridge University Press, Cambridge.

....that we are interested in are: Does a causal transmission link 3 The data set is generously supplied by Peter Martin of Financial Markets Research of CIBC Wood Gundy. 4 A good survey of the empirical evidence on the relations between interest rates and foreign exchanges can be found in Baillie and McMahon (1989). 2 still exist and is it stable for the short term interest rate spread to the spot Canadian US foreign exchange rate Can a neural network pull this hidden structure out 3 The Model and Pre test The network modeling in this study is based on a nonlinear relationship among the spot rate (C ....

Baillie, R. T. and P. McMahon (1989): The Foreign Exchange Market: Theory and Econometric Evidence, Cambridge: Cambridge University Press.

....with a unitary cointegrating vector. Evans and Lewis (1993) and Alexakis and Apergis (1996) fail to even find a long run relationship between forward and corresponding future spot rates. Ngama (1992) 2 For alternative forms of testing the FRUH and a survey of the evidence and issues involved see Baillie and McMahon (1989) and Engel (1996) 3 A series is integrated of order d , denoted by Id ( if it is rendered stationary after differencing it d times. 4 Strictly speaking, the FRUH requires that t k S t f be a white noise process, a stronger condition than covariance stationarity. In that sense, the ....

Baillie, R. T. and P. McMahon (1989), The foreign exchange market: Theory and econometric evidence, Cambridge University Press.

....statistical link between the spread and the spot rate. Alternatively, 3 The data set is generously supplied by Peter Martin of Financial Markets Research, CIBC Wood Gundy. 4 A good survey of the empirical evidence on the relations between interest rates and foreign exchanges can be found in Baillie and McMahon (1989). if the change in the spread is unanticipated, and a surprise to the market , then the impact on the spot C will be both immediate and more descernible because there is a shock impinging on the market and therefore market s traders will momentarily focus all of their attention on the ....

Baillie, R. T. and P. McMahon (1989): The Foreign Exchange Market: Theory and Econometric Evidence, Cambridge: Cambridge University Press.

....rates tend to adjust, as is conjectured by the purchasing power parity (PPP) hypothesis, so that monies in different countries tend to buy equivalent baskets of goods. One commonly assumed major implication of this PPP hypothesis is that real exchange rates should be mean stationary (see, e.g. Baillie and McMahon, 1989). In contrast, if they follow a random walk or, in general, if they have an autoregressive unit root, then there is no equilibrium value to which the real exchange rates return and present shocks become permanent deviations. Recently, tests for the stationarity of real exchange rates in the U.S. ....

Baillie, Richard T. and McMahon, P.C. (1989). The Foreign Exchange Market: Theory and Econometric Evidence, Cambridge University Press, Cambridge.

....networks. It has been widely accepted that foreign exchange rates are I(1) integrated of order one) processes and that changes of exchange rates are uncorrelated over time. Hence, changes in exchange rates are not linearly predictable in general. For a comprehensive review of these issues, see Baillie and McMahon (1989). Since the empirical studies supporting these conclusions rely mainly on linear time series techniques, it is not unreasonable to conjecturethat the linear unpredictability of exchange rates may be due to limitations of linearmodels. Hsieh (1989) finds that changes of exchange rates may be ....

....Yen (JY) and Swiss Franc (SF) are investigated. The dataare daily opening bid prices ofthe NY Foreign Exchange Market from March 1, 1980 to January 28, 1985, consisting of 1245 observations. All series except BP are US dollars per unit of foreign currency. This data set has also been used in Baillie and Bollerslev (1989). Let S denote the i th exchangerate at time t, i;t and y = log S 0 log S , i =BP, CD, DM, JY, SF. By applying various unit root i;t i;t i;t01 tests, Baillie and Bollerslev (1989) find that log S are unit root processes without drift i;t and that y behavelikeamartingale difference sequence. ....

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Baillie, R. T. and P.C.McMahon (1989), The Foreign Exchange Market: Theory and Econometric Evidence,Cambridge UniversityPress, New York.

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