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The long-run determination of the real exchange rate. Evidence from an intertemporal modelling framework using the dollar-pound exchange rate

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  • Pilbeam, K.
  • Litsions, I.

Abstract

This paper develops a model of optimal choice over an array of different assets, including domestic and foreign bonds, domestic and foreign equities and domestic and foreign real money balances in order to examine the determination of the real exchange rate in the long-run. The model is tested empirically using data from the UK and the USA. The results show that all the coefficients of the model are right signed and significant and consequently financial assets may play a significant role in the determination of the real exchange rate.

Suggested Citation

  • Pilbeam, K. & Litsions, I., 2015. "The long-run determination of the real exchange rate. Evidence from an intertemporal modelling framework using the dollar-pound exchange rate," Working Papers 15/19, Department of Economics, City St George's, University of London.
    • Handle: RePEc:cty:dpaper:15/19
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    References listed on IDEAS

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    3. Kimolo, Deogratius & Mrema, Stanislaus, 2019. "Real Exchange Rate Misalignments in Tanzania," MPRA Paper 114672, University Library of Munich, Germany.
    4. Deogratius Kimolo & Camillus Kombe & Stansilaus Mrema, 2022. "Real Exchange Rate Misalignments in Tanzania," European Journal of Business and Management Research, European Open Science, vol. 7(6), pages 63-71, October.

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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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