Real exchange rates: evidence from black markets using fractionally integrated semiparametric techniques

Abstract

The behaviour of the real exchange rates (relative to the US dollar) is examined in this article using monthly data obtained from the black markets for foreign exchange of eight Asian developing countries. Using the quasi maximum likelihood estimation procedure of Robinson (Annals of Statistics, 23, 1630–61, 1995), the results indicate that the order of integration of all currencies except the Indian and the Pakistani rupees are close but below 1, implying that mean reversion occurs in the long run.