Modelling the Japanese Exchange Rate in Terms of I(d) Statistical Models with Parametric and Semiparametric Techniques

Abstract

In this article we model monthly data on the Japanese nominal exchange rate in relation_x000D_ to the US dollar by means of fractionally integrated statistical models. For this purpose, we use both parametric and semiparametric techniques proposed by P.M. Robinson in a number_x000D_ of papers. The results indicate that the order of integration of the series is higher than 1 and_x000D_ thus the standard approach of taking first differences to get series which are integrated of_x000D_ order 0 (which is required, for example, in the context of cointegration) may lead to spurious_x000D_ results, the series still having a component of long memory behaviour.