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Efficiency Of Foreign Exchange Markets: A Developing Country Perspective

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journal contribution
posted on 06.06.2017 by Wickremasinghe, Guneratne B
This study tests weak and semi-strong form efficiency of the foreign exchange market in Sri Lanka during the recent float using six bilateral exchange rates. Weak-form efficiency is examined using unit root tests while semi-strong form efficiency is tested using co-integration, Granger causality tests and variance decomposition analysis. Results indicate that the Sri Lankan foreign exchange market is consistent with the weak-form of the Efficient Market Hypothesis. However, the results provide evidence against the semi- strong version of the Efficient Market hypothesis. These results have important implications for government policy makers and participants in the foreign exchange market of Sri Lanka.

History

Year of first publication

2004

Series

Asian Business and Economics Research Unit

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