Mozambique Metical Exchange Rate Dynamics: Evidence of Fractional Co‐Integration in the USA and South African Rates |
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| Authors: | Carlos P Barros Luis Alberiko Gil‐Alana João Faria |
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| Affiliation: | 1. 00?35121?39?22?80100?351?21?39?67?971;2. Instituto de Economia e Gestao, Technical University of Lisbon, Lisbon, Portugal;3. University of Navarra, Faculty of Economics, Pamplona, Navarra, Spain;4. University of Texas at El Paso Economics, El Paso, Texas, United States |
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| Abstract: | This paper studies the exchange rate dynamics of the Mozambique metical with respect to the US dollar and the South African rand. However, instead of using standard I(0)/I(1) techniques, we use long memory and fractionally integrated and co‐integrated models. Our results indicate that the two exchange rates are highly persistent, with orders of integration equal to or above 1. They also seem to be co‐integrated, with an order of integration close to albeit above 0 but with an AR coefficient very close to 1. Thus, although the two series seem to be fractionally co‐integrated, shocks in the long‐run relationship between the two variables are persistent and take a long time to disappear. |
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| Keywords: | C22 Exchange rates long memory fractional co‐integration |
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