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Role of Japan-US relative GDP and broad money supply in determining the yen-dollar exchange rate

Author

Listed:
  • Matiur Rahman
  • Mihajlo Balic
  • Charles B. Swindle

Abstract

This paper analyses the role of relative GDP and broad money supply (M2) in the determination of the yen-dollar exchange rate. The sample period spans from the first quarter of 1988 to the second quarter of 2004. Standard cointegration procedures are applied. No clear evidence of a long-run equilibrium relationship exists among the variables. The estimates of the VAR model reveal short run causal flows from Japan-US relative GDP and relative broad money supply to the yen-dollar exchange rate with interactive feedbacks. The effects of the relative GDP on the yen-dollar exchange rate have no definitive patterns. The effects of the relative broad money supply are counterintuitive during this turbulent period of the Japanese economy.

Suggested Citation

  • Matiur Rahman & Mihajlo Balic & Charles B. Swindle, 2005. "Role of Japan-US relative GDP and broad money supply in determining the yen-dollar exchange rate," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 7(4), pages 311-323.
    • Handle: RePEc:ids:gbusec:v:7:y:2005:i:4:p:311-323
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