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Long-term trend and short-run dynamics of the Canadian dollar: an error correction modelling approach

  • B. Moazzami
  • F. J. Anderson
Registered author(s):

    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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    File URL: http://www.tandfonline.com/doi/abs/10.1080/0003684032000090627
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    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 35 (2003)
    Issue (Month): 13 ()
    Pages: 1527-1530

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    Handle: RePEc:taf:applec:v:35:y:2003:i:13:p:1527-1530
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    1. 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.
    2. Lothian, James R. & Taylor, Mark P., 1997. "Real exchange rate behavior," Journal of International Money and Finance, Elsevier, vol. 16(6), pages 945-954, December.
    3. Amano, Robert A. & van Norden, Simon, 1995. "Terms of trade and real exchange rates: the Canadian evidence," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 83-104, February.
    4. David Backus, 1982. "Empirical Models of the Exchange Rate: Separating the Wheat from the Chaff," Working Papers 463, Queen's University, Department of Economics.
    5. Murray, John & Mark Zelmer & Zahir Antia, 2000. "International Financial Crises and Flexible Exchange Rates: Some Policy Lessons from Canada," Technical Reports 88, Bank of Canada.
    6. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December.
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