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Analysis of the Behavior of the New Zealand Dollar Exchange Rate: Comparison of Four Major Models

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  • Hsing, Yu

Abstract

The purpose of this paper is to compare four major exchange rate models. Based on the value of adjusted R2, the uncovered interest parity model performs best, followed by the purchasing power parity model using the relative PPI, the Mundell-Fleming model, and the monetary model. The unexpected negative sign of the relative money supply in the monetary model and the unexpected negative sign of real money supply and the domestic interest rate in the Mundell-Fleming model suggest that more study is needed to examine the behavior of exchange rate fluctuations for the New Zealand dollar.

Suggested Citation

  • Hsing, Yu, 2009. "Analysis of the Behavior of the New Zealand Dollar Exchange Rate: Comparison of Four Major Models," Review of Applied Economics, Review of Applied Economics, vol. 5(1-2).
  • Handle: RePEc:ags:reapec:143223
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    More about this item

    Keywords

    purchasing power parity; uncovered interest parity; monetary model; Mundell Fleming model; Financial Economics; International Relations/Trade; Marketing; Research Methods/ Statistical Methods; F31;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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