![]() Along with the long-run effects, long memory is helpful in future predictions with an indication of some nonlinear dependence among observations (Charfeddine 2014). ![]() Long-range dependence is imperative and appealing, as it point towards the long-run effects of shocks. ![]() Moreover, persistence in the exchange rates is important for policymakers to adopt the specific measures according to the persistence level in case of shocks (Barros, Gil‐Alana et al. This characteristic is known as long memory and explains the long-lasting effects of shocks to volatility. High persistence in different volatility measures of a financial time series is a common phenomenon and is analysed either by the significant correlations at long lags or by using the spectral density analysis. Volatility is persistent and predictable, whereas the asset returns are almost random (Choi et al. Taylor ( 2006) described the transaction costs, the collaboration of various agents in currency markets, and official interferences in these markets as three sources of nonlinear trends in the real exchange rates. Stock markets and foreign exchange rates are characterised by nonlinear and non-stationary behaviour in the literature. Being a risk measure, an increase in the exchange rate volatility reduces trade by raising costs of the risk-averse investors and traders. The exchange rate volatility has been described as an important factor of inflation in Turkey and Mexico (Mendoza 2012). Additionally, the exchange rate fluctuations have unlimited impacts on inflation predictability, international trade, and financial asset pricing. Less developed countries are more prone to the phases of high exchange rate volatility owing to depreciation (appreciation) of the currency caused by either national or international shocks. A persistent level of exchange rates in a country is important to reflect the stability of its currency, and it provides helpful information for policy implications in case of sudden shocks (Barros, Gil‐Alana et al.
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