6533b82afe1ef96bd128c045
RESEARCH PRODUCT
Assessing nonlinear structures in real exchange rates using recurrence plot strategies
Dulce ContrerasJorge Belaire-franchLorena Tordera-lledosubject
Nonlinear systemPurchasing power parityRecurrence quantification analysisEconometricsStatistical and Nonlinear PhysicsEconomic modelCondensed Matter PhysicsSpurious relationshipRecurrence plotMathematical economicsMathematicsdescription
Purchasing power parity (PPP) is an important theory at the basis of a large number of economic models. However, the implication derived from the theory that real exchange rates must follow stationary processes is not conclusively supported by empirical studies. In a recent paper, Serletis and Gogas [Appl. Finance Econ. 10 (2000) 615] show evidence of deterministic chaos in several OECD exchange rates. As a consequence, PPP rejections could be spurious. In this work, we follow a two-stage testing procedure to test for nonlinearities and chaos in real exchange rates, using a new set of techniques designed by Webber and Zbilut [J. Appl. Physiol. 76 (1994) 965], called recurrence quantification analysis (RQA). Our conclusions differ slightly from Serletis and Gogas [Appl. Finance Econ. 10 (2000) 615], but they are also supportive of chaos for some exchange rates.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2002-11-01 | Physica D: Nonlinear Phenomena |