Economic integration and the foreign exchange
AbstractThis paper demonstrates effects of economic convergence processes on the foreign exchange behaviour in a monetary modelling approach. Since the exchange rate represents the relative price of two currencies, commonness of stochastic trends between the fundamental determinants of supply and demand of the underlying monies restricts exchange rate movements to transitory fluctuations. In the spirit of optimal currency areas, this has the potential to serve as a criterion for an all-round integration of two economies. Empirically, such a constellation is found between Australia and New Zealand, whereas diverging trends in money and interest rates characterise the relation of Australia towards the US. Copyright Springer-Verlag 2013
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Bibliographic InfoArticle provided by Springer in its journal International Economics and Economic Policy.
Volume (Year): 10 (2013)
Issue (Month): 2 (June)
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Web page: http://www.springerlink.com/link.asp?id=111059
Monetary exchange rate model; Convergence; Stationarity; Australia; F31; F41; C32;
Other versions of this item:
- Weber, Enzo, 2007. "Economic Integration and the Foreign Exchange," MPRA Paper 4737, University Library of Munich, Germany, revised Sep 2007.
- Enzo Weber, 2007. "Economic Integration and the Foreign Exchange," SFB 649 Discussion Papers SFB649DP2007-038, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
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