Nonlinear Analyses of Exchange Rates Based on the BDS-Surrogate Data: Evidence from Main Asian Markets

This paper proposes a new method of combining BDS testing with surrogate data technique to detect the nonlinearities of the time series. Next, using the method, this paper presents some empirical evidence on the presence of nonlinearities of six main Asian exchange rates, comparing the difference between the original data and surrogate data generated from the original and rejecting the null hypothesis in confidence coefficient 95%. We concluded that the exchange rate time series contain deterministic nonlinear components.