Long-term dependence in exchange rates

The extent to which exchange rates of four major currencies against the cre ek Drachma exhibit long-term dependence is investigated using a R/S analysi s testing framework. We show that both classic R/S analysis and the modifie d R/S statistic if enhanced by bootstrapping techniques can be proven very reliable tools to this end. Our findings support persistence and long-term dependence with non-periodic cycles for the Deutsche Mark and the French Fr anc series. In addition a noisy chaos explanation is favored over fractiona l Brownian motion, On the contrary, the US dollar and British Pound were fo und to exhibit a much more random behavior and lack of any long-term struct ure.