Are there bubbles in exchange rates? Some new evidence from G10 and emerging market economies |
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| Institution: | 1. School of Economics & Management, Southwest Jiaotong University, Sichuan, China;2. College of Finance and Economics, Yangtze Normal University, Chongqing, China;1. School of Mathematics and Statistics, Nanjing University of Information Science & Technology, Nanjing 210044, China;2. Department of Marketing and Management, Macquarie University, North Ryde, NSW 2109, Australia;3. Division of Mathematical Sciences, SPMS, Nanyang Technological University, Singapore, 637371, Singapore;1. Department of Econometrics and Business Statistics, Monash University, Australia;2. Research School of Finance, Actuarial Studies and Applied Statistics, Australian National University, Australia;1. Department of Finance, Ocean University of China, China;2. Department of Accounting and Information, Ling Tung University, Taiwan;3. Department of Finance, West University of Timisoara, Timisoara, Romania |
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| Abstract: | The existence, or otherwise, of bubbles has become a topical issue in economics and finance, particularly following the Global Financial Crisis. Using the generalized sup ADF (GSADF), unit root tests of Phillips et al. (2015a, PSY) we investigate evidence for exchange rate bubbles in some G10, Asian and BRICS countries from Mar.1991-Dec.2014. We conclude that the US$-Mexican Peso crisis of 1994–95 was a bubble. Of particular interest to financial market trading, is that newly emerging countries, with relatively shallow financial markets, may be more likely to exhibit bubbly behavior in foreign exchange markets than more mature G10 countries. |
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| Keywords: | Bubbles Rational bubbles GSADF test G10 countries Emerging markets & BRICS countries |
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