Testing for explosive bubbles in the South African-US exchange rate using the sequential ADF procedures
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DOIhttp://dx.doi.org/10.21511/bbs.12(1-1).2017.02
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Article InfoVolume 12 2017, Issue #1 (cont.), pp. 105-112
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This paper tests for the existence of speculative bubbles in the South African-US exchange rate using the sequential ADF procedures. In particular, the paper uses the SADF and GSADF right-tailed unit root tests to explore the existence of explosive bubbles in the South African-US exchange rate for the time period running from January1980 through July 2012. The results provide evidence in support of the existence of explosive bubbles in the nominal rand-dollar exchange rate, the real exchange rate of traded and non-traded goods. The explosive behavior exhibited by the South African rand-US dollar exchange rate can be interpreted as evidence of rational bubbles given that this behavior is driven by the fundamentals including relative prices of traded and non-traded goods.
- Keywords
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JEL Classification (Paper profile tab)F31, C12, C15, C22
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References25
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Tables4
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Figures3
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- Fig. 1. SADF test for nominal rand-dollar exchange rate
- Fig. 2. SADF test for real exchange rate of non-traded goods
- Fig. 3. SADF test for real exchange rate of traded goods
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- Table 1. Descriptive statistics
- Table 2. The ADF, SADF, RADF and GSADF tests for nominal exchange rate
- Table 3. The ADF, SADF, RADF and GSADF tests for exchange rate-relative price of nontraded goods ratio
- Table 4. The ADF, SADF, RADF and GSADF tests for exchange rate-relative price of traded goods ratio
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