Long Memory and Volatility Dynamics in the US Dollar Exchange Rate

  1. Guglielmo Maria Caporale 1
  2. Luis a. Gil-Alana 2
  1. 1 Brunel University London
    info

    Brunel University London

    Uxbridge, Reino Unido

    ROR https://ror.org/00dn4t376

  2. 2 Universidad de Navarra
    info

    Universidad de Navarra

    Pamplona, España

    ROR https://ror.org/02rxc7m23

Revista:
Multinational Finance Journal

ISSN: 1096-1879

Ano de publicación: 2012

Volume: 16

Número: 1/2

Páxinas: 105-136

Tipo: Artigo

DOI: 10.17578/16-1/2-5 GOOGLE SCHOLAR lock_openAcceso aberto editor

Outras publicacións en: Multinational Finance Journal

Resumo

This paper focuses on nominal exchange rates, specifically the US dollar rate vis-à-vis the Euro and the Japanese Yen at a daily frequency. In the paper both absolute values of returns and squared returns are modelled using long-memory techniques, being particularly interested in volatility modelling and forecasting. Compared with previous studies using fractional integration such as Granger and Ding (1996), a more general model is estimated, which allows for dependence not only at the zero but also at other frequencies. The results show differences in the behaviour of the two series: a long-memory cyclical model and a standard I(1) model seem to be the most appropriate for the US dollar rate vis-à-vis the Euro and the Japanese Yen respectively.