MULTIVARIATE COINTEGRATION TESTING OF THE EFFICIENCY OF AUSTRALIA'S SPOT FOREX MARKET

Efficiency in Australia's spot FOREX market is tested using daily, weekly and four-weekly data subsequent to the floating of the dollar in 1983. Earlier research using pairwise cointegration tests of currency markets has suggested little evidence of market inefficiencies. However, multivariate cointegration tests carried out in the paper, based on canonical transformation of the exchange rate data, suggest the existence of long run equilibrium relationships among the spot rates, implying the existence of market inefficiency in the FOREX market.