Topic : Japanese yen – USD exchange rate 1. Introduction of the importance of JPY/USD 2. Download the FEX of JPY/USD in R 3. Conduct an ADF test in R to test whether the FEX has a unit root and is stationary 4. Calculate the log return and conduct an ADF test

1. Introduction of the importance of JPY/USD

The Japanese Yen (JPY) to US Dollar (USD) exchange rate is one of the most traded currency pairs in the global forex market, reflecting the economic power and trade relations between Japan and the United States. The rate can be influenced by a variety of factors, including interest rates, inflation, political stability, and economic performance in both countries.

2. Download the FEX of JPY/USD in R

To download the foreign exchange (FEX) data of JPY/USD in R, you can use the quantmod package. Here is a simple example:

# Install and load the package
install.packages("quantmod")
library(quantmod)

# Get the data
getSymbols("USD/JPY", src = "oanda", return.class = "xts")

3. Conduct an ADF test in R to test whether the FEX has a unit root and is stationary

The Augmented Dickey-Fuller (ADF) test is a common statistical test used to determine whether a given time series is stationary. In R, you can use the adf.test function from the tseries package:

# Install and load the package
install.packages("tseries")
library(tseries)

# Conduct the ADF test
adf.test(USD/JPY)

4. Calculate the log return and conduct an ADF test

The log return can be calculated by taking the difference of the log of the prices. After calculating the log return, you can conduct an ADF test on it:

# Calculate the log return
log_return <- diff(log(USD/JPY))

# Conduct the ADF test on the log return
adf.test(log_return, alternative = "stationary")

Please replace "USD/JPY" with the actual variable name of your data.