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Purchasing Power Parity: Granger Causality Tests for the Yen- Dollar Exchange Rate

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Author Info

  • Gunther Schnabl

    (Tuebingen University)

  • Dirk Baur

    (Tuebingen University)

Abstract

The paper analyses the causality between the Japanese-US relative export prices and the yen-dollar exchange rate. It explains why the Japanese yen proved strong even during the economic slump of the 1990s. The paper suggests that the appreciation of the Japanese yen forced the Japanese enterprises into price reductions and productivity increases, which put a floor under the high level of the yen and thus initiated rounds of appreciation. This corresponds to the conjecture of a vicious (virtuous) circle of appreciation and price adaptation.

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File URL: http://128.118.178.162/eps/if/papers/0506/0506006.pdf
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Bibliographic Info

Paper provided by EconWPA in its series International Finance with number 0506006.

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Length: 22 pages
Date of creation: 15 Jun 2005
Date of revision:
Handle: RePEc:wpa:wuwpif:0506006

Note: Type of Document - pdf; pages: 22
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Web page: http://128.118.178.162

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Keywords: yen; yen-dollar exchange rate; purchasing power parity; Granger causality test;

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References

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  24. Frenkel, Jacob A, 1976. " A Monetary Approach to the Exchange Rate: Doctrinal Aspects and Empirical Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 78(2), pages 200-224.
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  27. Hung, Wansing & Kim, Yoonbai & Ohno, Kenichi, 1993. "Pricing exports: a cross-country study," Journal of International Money and Finance, Elsevier, vol. 12(1), pages 3-28, February.
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