On the Japanese Yen-US Dollar Exchange Rate: A Structural Econometric Model Based on Real Interest Differentials
AbstractIn 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 InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1639.
Date of creation: Apr 1997
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Other versions of this item:
- MacDonald, Ronald & Nagayasu, Jun, 1998. "On the Japanese Yen-U.S. Dollar Exchange Rate: A Structural Econometric Model Based on Real Interest Differentials," Journal of the Japanese and International Economies, Elsevier, vol. 12(1), pages 75-102, March.
- F31 - International Economics - - International Finance - - - Foreign Exchange
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