Are there bubbles in the sterling-dollar exchange rate? : new evidence from sequential ADF tests ; conference paper

Chen, Wenjuan; Bettendorf, Timo

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.

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Year of publication:	2013
Authors:	Bettendorf, Timo ; Chen, Wenjuan
Published in:	Beiträge zur Jahrestagung des Vereins für Socialpolitik 2013: Wettbewerbspolitik und Regulierung in einer globalen Wirtschaftsordnung Session: Exchange rates ; V1
Publisher:	[Kiel : ZBW
Subject:	exchange rates \| rational bubbles \| sequential unit root test \| Wechselkurs \| Exchange rate \| Spekulationsblase \| Bubbles \| Pfund Sterling \| Pound Sterling \| US-Dollar \| US dollar \| Sequentialtest \| Sequential test \| Einheitswurzeltest \| Unit root test \| USA \| United States \| Großbritannien \| United Kingdom