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On the Japanese Yen-U.S. Dollar Exchange Rate: A Structural Econometric Model Based on Real Interest Differentials

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  • MacDonald, Ronald
  • Nagayasu, Jun

Abstract

In this paper the short- and long-run movements of the Japanese yen-US dollar exchange rate are modelled for the recent floating period. The modern general-to-specific approach is used as our econometric framework. In contrast to some other exchange rate studies, we interpret multiple cointegrating vectors using economic theory. Among the findings are sensible and significant long-run relationships, and dynamic equations which describe the movements of the exchange rate and satisfy a battery of diagnostic tests. The models are shown to produce good in-sample forecasting performance and also out-of-sample forecasting performance which dominates a random walk.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 12 (1998)
Issue (Month): 1 (March)
Pages: 75-102

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Handle: RePEc:eee:jjieco:v:12:y:1998:i:1:p:75-102

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Web page: http://www.elsevier.com/locate/inca/622903

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Cited by:
  1. Aliyu, Shehu Usman Rano, 2008. "Exchange Rate Volatility and Export Trade in Nigeria: An Empirical Investigation," MPRA Paper 13490, University Library of Munich, Germany, revised 17 Feb 2009.
  2. Gunther Schnabl, 2004. "Weak Economy and Strong Currency - The Origins of the Strong Yen in the 1990s," International Finance, EconWPA 0404017, EconWPA.
  3. Shehu Usman Rano, Aliyu, 2008. "Real Exchange Rate Misalignment: An Application of Behavioral Equilibrium Exchange Rate (BEER) to Nigeria," MPRA Paper 10343, University Library of Munich, Germany.
  4. Dieter M. Urban, 2007. "Terms of Trade, Catch-up, and Home Market Effect: The Example of Japan," CESifo Working Paper Series, CESifo Group Munich 2164, CESifo Group Munich.
  5. Atsushi Iimi, 2006. "Exchange Rate Misalignment," IMF Working Papers, International Monetary Fund 06/140, International Monetary Fund.
  6. Nagayasu, Jun, 2003. "Asymmetric effects of monetary indicators on the Japanese yen," Japan and the World Economy, Elsevier, Elsevier, vol. 15(2), pages 143-159, April.
  7. Mehmet Balcilar & Rangan Gupta & Charl Jooste, 2014. "Is the Rand Really Decoupled from Economic Fundamentals?," Working Papers, University of Pretoria, Department of Economics 201439, University of Pretoria, Department of Economics.
  8. 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.
  9. Njuguna S. Ndung'U & Rose W. Ngugi, 1999. "Adjustment and liberalization in Kenya: the financial and foreign exchange markets," Journal of International Development, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 11(3), pages 465-491.
  10. Plakandaras, Vasilios & Papadimitriou, Theophilos & Gogas, Periklis, 2012. "Directional forecasting in financial time series using support vector machines: The USD/Euro exchange rate," DUTH Research Papers in Economics, Democritus University of Thrace, Department of Economics 5-2012, Democritus University of Thrace, Department of Economics.

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