Behavior of exchange rates and returns: Long memory and cointegration

Abstract

Warsaw School of Economics, Institute of Econometrics, Madalinskiego 6/8, 02-513 Warsaw, Poland The aim of the paper is to present an example of analysis of exchange rate behavior with use of tools, built in GRETL econometric package, which have been developed by researchers often with background in physics or similar fields, but some (such as tests of integration and cointegration) are less known to physical audience. The series of interest is a bilateral USDPLN exchange rate; including the corresponding stock indices as additional variables can improve quality of a model even in period of crisis.