THE LONG-TERM DEPENDENCE IN REAL EXCHANGE RATES

Abstract

Author(s): Emre RKMEZ

In this study, the long-term dependency of the real exchange rates is analyzed for Turkey by using semiparametric method. We consider two real exchange rate series for Turkish lira: one is US dolar and the other one is Euro. Both series are composed of monthly data for the period of 2002-2016. In this respect, we first tested the stationary of the real exchange rates by using the traditional unit root tests. Afterwards, we proved that the real exchange rates have long-term dependency by using the Geweke and Porter-Hudak (GPH)'s log-periodogram regression method. We found that the real exchange rates in Turkey have long-term dependency during the time of interest. Moreover, the real exchange based on Dollar exhibits mean reversion. In other words, the effects of the shocks of distant past affect the price of today. On the other hand, the serie of the real Euro exchange rate has a persistence structure. The intensity of the effect of the shock determines that it has a strong persistence structure depending on the estimated fractional integration parameter.

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