Interest Rates and the Exchange Rate: Some international Evidence
AbstractThis paper attempts to examine the behaviour of the exchange rate in response to a change in interest rate differential. The empirical results of the study based on mounthly data from Britain, Canada, Germany and Japan provide support for Dornbusch's "overshooting" exchange rate in the short-run. However, in contrast to Dornbusch's proposition, thethe hypothesis of purchasing power parity is not empirically supported and the real exchange rates appeared to be non-stationary in all four cases.
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Bibliographic InfoPaper provided by New South Wales - School of Economics in its series Papers with number 97/9.
Length: 17 pages
Date of creation: 1997
Date of revision:
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Postal: THE UNIVERSITY OF NEW SOUTH WALES, SCHOOL OF ECONOMICS, P.O.B. 1 KENSINGTON, NEW SOUTH WALES 2033 AUSTRALIA.
Fax: +61)-2- 9313- 6337
Web page: http://www.economics.unsw.edu.au/
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EXCHANGE RATE ; INTEREST RATE;
Find related papers by JEL classification:
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- F31 - International Economics - - International Finance - - - Foreign Exchange
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