Long-term trend and short-run dynamics of the Canadian dollar: an error correction modelling approach
Using quarterly data for 1972-2000, the paper examines the long-term and short-term movements of the US-Canadian exchange rate. It is found that the standard purchasing power parity condition fails to explain movements of the Canadian dollar. The explanatory power of the model increases significantly when resource commodity prices are added to the equation. Short-term movements in the Canadian dollar are influenced by the interest rate differential between Canada and the USA.
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Volume (Year): 35 (2003)
Issue (Month): 13 ()
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References listed on IDEAS
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- Frankel, Jeffrey A & Rose, Andrew K, 1995.
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1128, C.E.P.R. Discussion Papers.
- Frankel, Jeffrey A. & Rose, Andrew K., 1996. "A panel project on purchasing power parity: Mean reversion within and between countries," Journal of International Economics, Elsevier, vol. 40(1-2), pages 209-224, February.
- Frankel, Jeffrey A. & Rose, Andrew K., 1995. "A Panel Project on Purchasing Power Parity: Mean Reversion Within and Between Countries," Center for International and Development Economics Research (CIDER) Working Papers 233411, University of California-Berkeley, Department of Economics.
- Jeffrey A. Frankel & Andrew K. Rose, 1995. "A Panel Project on Purchasing Power Parity: Mean Reversion Within and Between Countries," NBER Working Papers 5006, National Bureau of Economic Research, Inc.
- Jeffrey A. Frankel and Andrew K. Rose., 1995. "A Panel Project on Purchasing Power Parity: Mean Reversion Within and Between Countries," Center for International and Development Economics Research (CIDER) Working Papers C95-052, University of California at Berkeley.
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