Modeling the Australian Dollar-US Dollar Exchange Rate Using Cointegration Techniques
AbstractThis paper examines the link between the Australian dollar's exchange rate and Australia's terms of trade. The US$/A$ rate is found to be cointegrated with the terms of trade, and the relationship between the two variables appears to be robust. An estimated error-correction model for changes in the nominal US$/A$ is shown to have reasonable out-of-sample predictive powers. Weak exogeneity tests within the Johansen framework indicate highly significant causality running from the terms of trade to the exchange rate but less significant causality running from the exchange rate to the terms of trade. Copyright 1999 by Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of International Economics.
Volume (Year): 7 (1999)
Issue (Month): 2 (May)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576
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- Sanidas, Elias, 2005. "The Australian Dollar's Long-Term Fluctuations and Trend: The Commodity Prices-cum-Economic Cycles Hypothesis," Economics Working Papers wp05-29, School of Economics, University of Wollongong, NSW, Australia.
- Cortes, Maria, 2007. "Examining Patterns of Bilateral Trade between Australia and Colombia by Using Cointegration Analysis and Error-Correction Models," Economics Working Papers wp07-20, School of Economics, University of Wollongong, NSW, Australia.
- Carmen Mar? Mart?ez, 2003. "The Structural Approach of a Natrex Model on Equilibrium Exchange Rates," UFAE and IAE Working Papers 588.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Dimitris Hatzinikolaou & Metodey Polasek, 2005. "The commodity-currency view of the Australian dollar: A multivariate cointegration approach," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 81-99, May.
- Reza Y. Siregar & Choo Lay Har, 2001. "Economic Fundamentals and Managed Floating Exchange Rate Regime in Singapore," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 26(1), pages 133-148, June.
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