Abstract
Time series analysis is applied to quarterly data on nominal and real, lira/pound-sterling exchange rates for the period 1973 Ql to 1988 Q2. The paper uses logarithmic values which arc examined using both time and frequency domain techniques. Trends and cyclical characteristics are examined and related to the concept of purchasing power parity. Furthermore, the validity of the random walk model is considered, as well as the distribution of exchange rate movements. The results suggest that the nominal exchange rate follows a quasi-random walk with drift, whereas real exchange rates show a quasi-random walk without drift. There exists, however, evidence of a non-stationary mean. The frequency domain techniques do not clearly show that cyclical characteristics are a feature of exchange rate movements. The distribution of these movements shows approximate normality.
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© 1991 Springer-Verlag Berlin · Heidelberg
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Pollock, A.C. (1991). The Time Series Characteristics of Quarterly Nominal and Real Lira/Pound-Sterling Exchange Rate Movements, 1973–1988. In: Spronk, J., Matarazzo, B. (eds) Modelling for Financial Decisions. Studies in Financial Modelling. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-76761-6_12
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