A BAYESIAN ANALYSIS OF THE UNIT ROOT IN REAL EXCHANGE RATES

Schotman P. and Herman van Dijk ()

No 272390, Econometric Institute Archives from Erasmus University Rotterdam

Abstract: We propose a posterior odds analysis of the hypothesis of a unit root in real exchange rates. From a Bayesian viewpoint the random walk hypothesis for real exchange rates is a posteriori as probable as a stationary AR(1) process for four out of eight time series investigated. The French franc / German Dmark is clearly stationary, while the Japanese yen / US dollar is most likely a random walk.' In contrast, classical tests are unable to reject the unit root for any of these series.

Keywords: Agricultural and Food Policy; International Relations/Trade; Research Methods/ Statistical Methods (search for similar items in EconPapers)
Pages: 47
Date: 1989-07
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Related works:
Journal Article: A Bayesian analysis of the unit root in real exchange rates (1991)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:eureia:272390

DOI: 10.22004/ag.econ.272390

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