Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5059842 | Economics Letters | 2013 | 4 Pages |
Abstract
There has been mixed evidence regarding the existence of rational bubbles in the foreign exchange markets. This paper introduces recently developed sequential unit root tests into the analysis of exchange rates bubbles. We find strong evidence of explosive behavior in the nominal Sterling-dollar exchange rate. However, this explosive behavior should not be simply interpreted as evidence of rational bubbles, as we show that it might be driven by the relative prices of traded goods.
Keywords
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Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Timo Bettendorf, Wenjuan Chen,