Half-lives of currencies and aggregation bias

Kunkler, M. and MacDonald, R. (2015) Half-lives of currencies and aggregation bias. Economics Letters, 135, pp. 58-60. (doi:10.1016/j.econlet.2015.07.030)

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Abstract

We revisit the exchange rate half-life issue and demonstrate that observed half-lives can be reduced significantly by modelling (relative) currency rates, rather than exchange rates. We show that the average observed half-life for relative currency rates, around a measure of central tendency, is about 1.55 years and this drops to 1.30 years when the US dollar is excluded. We also show that a standard exchange rate model exhibits aggregation bias.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:MacDonald, Professor Ronald
Authors: Kunkler, M., and MacDonald, R.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Economics Letters
ISSN:0165-1765
ISSN (Online):1873-7374

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