We test the validity of the Purchasing Power Parity theory, examining the Real Exchange Rate of 23 OECD countries for mean-reversion. In doing so, we estimate the Hurst exponent, which is a well-established estimator of long memory in time series analysis. The innovation of our approach is that...

This study contrasts the (apparent) random walk behaviour of the real exchange rate to chaotic dynamics, using (US) dollar-based real exchange rates for 17 OECD countries (covering the period 1957:1-1995:4). Tests for deterministic noisy chaos are carried out using the Nychka, Ellner, Gallant...