The Monetary Model of the Dollar-Yen Exchange Rate Determination: A Cointegration Approach
This paper validates the monetary model in the determination of the dollar-yen exchange rate by applying cointegration methodology. Estimation results indicate a stationary relationship between the dollar-yen exchange rate and monetary models, with long-term causality flowing from monetary variables to the dollar-yen exchange rate. The forecasting performance of the monetary model based on the error-correction model outperforms random walk models.
Volume (Year): 5 (2006)
Issue (Month): 2 (August)
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