Asymmetric adjustment and co-integration in foreign exchange markets: an empirical analysis.(Statistical Data Included)

Mid-Atlantic Journal of Business, December, 2001 by Samanta, Subarna K.; Zadeh, Ali H.M.

This study examines the relation between the spot rates and forward rates in the foreign exchange markets for five different countries: Canada, US, UK, Germany and Switzerland. Our findings indicate that for Canada and UK asymmetric adjustment process exists between these two rates, while for Germany and Switzerland the process seems to be symmetric. We also have found that the positive phase of the adjustment process is more persistent than the negative phase for Canada and UK. We have identified the optimal threshold level for the exchange rate differential for these countries, but the threshold error correction models do not provide us with any additional meaningful information about this adjustment process. It confirms the idea that the adjustment process in the...

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