
Contents
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7.1 Spot and Forward Rates in Foreign Exchange 7.1 Spot and Forward Rates in Foreign Exchange
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7.1.1 Positive Theory Variables and Log-Transformed Data Variables 7.1.1 Positive Theory Variables and Log-Transformed Data Variables
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7.2 A Formal Time-Series Analysis of an Economic Theory 7.2 A Formal Time-Series Analysis of an Economic Theory
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7.3 Harald Goldstein’s Empirical AnalysisClose 7.3 Harald Goldstein’s Empirical AnalysisClose
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7.3.1 The Prescriptions That Underlie the Statistical Analysis 7.3.1 The Prescriptions That Underlie the Statistical Analysis
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Tests of auxiliary hypotheses Tests of auxiliary hypotheses
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7.3.2 A Family of Data-Admissible Mathematical Models of MPD 7.3.2 A Family of Data-Admissible Mathematical Models of MPD
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T7.12 T7.12
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7.3.3 The Empirical Relevance of A1–A7 7.3.3 The Empirical Relevance of A1–A7
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7.3.4 Concluding Remarks 7.3.4 Concluding Remarks
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7.4 André Anundsen’s Empirical Analysis 7.4 André Anundsen’s Empirical Analysis
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7.4.1 Data Properties 7.4.1 Data Properties
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7.4.2 Cointegrated Vector Autoregression (CVAR) Analysis of Spot and One-Week-Forward Rates 7.4.2 Cointegrated Vector Autoregression (CVAR) Analysis of Spot and One-Week-Forward Rates
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7.5 The Dynamics of Foreign Exchange in Figure 7.1 7.5 The Dynamics of Foreign Exchange in Figure 7.1
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7.6 Appendix 7.6 Appendix
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7 Analysis of Positively Valued Economic Time Series
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Published:December 2014
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Abstract
Chapter VII has two purposes. One is to study the methodological problems that arise in analysing positively valued time series in foreign exchange. The other is to contrast the analysis of time series in formal econometrics with the analysis of such data in present-day econometrics. The chapter presents an axiomatic data confrontation of a theory of spot and forward exchange in foreign currency markets. In the formulation of the axioms, actual and auxiliary theory and data variables interact in such a way that the problem that usually arise in the analysis of positively valued time series disappears. The data for the empirical analysis comprise observations on spot and forward exchange rates in the market for Swiss Francs and US Dollars. In the empirical analysis, the given data are analysed, first, with the prescriptions of formal econometrics and, then, with the prescriptions on which present-day econometric time-series analysis insist. The statistical results yield different descriptions of the dynamics of foreign exchange and different inferences about the economics of social reality. In doing that the two contrasting empirical analyses provide interesting ingredients for the discussion of how best to incorporate economic theory in empirical analyses.
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