Asset Market and Balance of Payments Characteristics; An Eclectic Exchange Rate Model for the Dollar, Mark, and Yen
In this paper we use an exchange rate model that combines asset market characteristics with balance of payments interactions to examine the nominal effective exchange rates of the German mark, Japanese yen, and U.S. dollar for the recent experience with floating exchange rates. Our approach may be interpreted as one which attempts to flesh out the missing links that arise in conditioning an exchange rate solely on relative prices, as occurs in a standard PPP analysis. In contrast to much other empirical exchange rate modeling, our approach explicitly involves the use of a current account sustainability term. Amongst the findings reported in this paper are: significant, and sensible, long-run relationships for all of the currencies studied; appealing short-run dynamics for two of the currencies; and a finding that the Japanese effective exchange rate closely tracks the long-run exchange rate defined in this paper.
|Date of creation:||01 Jun 1995|
|Contact details of provider:|| Postal: International Monetary Fund, Washington, DC USA|
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stockman, Alan C., 1988.
"Real exchange-rate variability under pegged and floating nominal exchange-rate systems: An equilibrium theory,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 29(1), pages 259-294, January.
- Stockman, A.C., 1988. "Real Exchange Rate Variability Under Pegged And Floating Nominal Exchange Rate Systems: An Equilibrium Theory," RCER Working Papers 128, University of Rochester - Center for Economic Research (RCER).
- Alan C. Stockman, 1988. "Real Exchange Rate Variability under Pegged and Floating Nominal Exchange Rate Systems: An Equilibrium Theory," NBER Working Papers 2565, National Bureau of Economic Research, Inc.
- Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-328, August.
- Ronald Macdonald & Mark P. Taylor, 1993.
"The Monetary Approach to the Exchange Rate: Rational Expectations, Long-Run Equilibrium, and Forecasting,"
IMF Staff Papers,
Palgrave Macmillan, vol. 40(1), pages 89-107, March.
- Ronald MacDonald & Mark P. Taylor, 1992. "The Monetary Approach to the Exchange Rate; Rational Expectations, Long-Run Equilibrium and Forecasting," IMF Working Papers 92/34, .
- Hamid Faruqee, 1994.
"Long-Run Determinants of the Real Exchange Rate; A Stock-Flow Perspective,"
IMF Working Papers
- Hamid Faruqee, 1995. "Long-Run Determinants of the Real Exchange Rate: A Stock-Flow Perspective," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 80-107, March.
- Johansen, Soren & Juselius, Katarina, 1994.
"Identification of the long-run and the short-run structure an application to the ISLM model,"
Journal of Econometrics,
Elsevier, vol. 63(1), pages 7-36, July.
- Søren Johansen & Katarina Juselius, 1992. "Identification of the Long-Run and the Short-Run Structure: An Application to the ISLM Model," Discussion Papers 92-04, University of Copenhagen. Department of Economics.
- Campbell, John Y. & Shiller, Robert J., 1988.
"Interpreting cointegrated models,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 12(2-3), pages 505-522.
- Hendry, D.F. & Mizon, G.E., 1990. "Evaluating Dynamic Econometric Models By Encompassing The Var," Economics Series Working Papers 99102, University of Oxford, Department of Economics.
- Cheung, Yin-Wong & Lai, Kon S., 1993. "Long-run purchasing power parity during the recent float," Journal of International Economics, Elsevier, vol. 34(1-2), pages 181-192, February.
- Ronald Mac Donald, 1998. "What Do We Really Know About Real Exchange Rates?," Working Papers 28, Oesterreichische Nationalbank (Austrian Central Bank).
- Kugler, Peter & Lenz, Carlos, 1993.
"Multivariate Cointegration Analysis and the Long-Run Validity of PPP,"
The Review of Economics and Statistics,
MIT Press, vol. 75(1), pages 180-184, February.
- Peter Kugler & Carlos Lenz, 1990. "Multivariate Cointegration Analysis and the Long-run Validity of PPP," Diskussionsschriften dp9004, Universitaet Bern, Departement Volkswirtschaft.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
- Ronald MacDonald, 1995.
"Long-Run Exchange Rate Modeling; A Survey of the Recent Evidence,"
IMF Working Papers
- Ronald Macdonald, 1995. "Long-Run Exchange Rate Modeling: A Survey of the Recent Evidence," IMF Staff Papers, Palgrave Macmillan, vol. 42(3), pages 437-489, September.
- MacDonald, Ronald, 1993.
"Long-Run Purchasing Power Parity: Is It for Real?,"
The Review of Economics and Statistics,
MIT Press, vol. 75(4), pages 690-695, November.
- Kenneth A. Froot & Kenneth Rogoff, 1994.
"Perspectives on PPP and Long-Run Real Exchange Rates,"
NBER Working Papers
4952, National Bureau of Economic Research, Inc.
- Froot, Kenneth A. & Rogoff, Kenneth, 1995. "Perspectives on PPP and long-run real exchange rates," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 32, pages 1647-1688 Elsevier.
- Ken Froot & Kenneth Rogoff, "undated". "Perspectives on PPP and Long-Run Real Exchange Rates," Working Paper 32027, Harvard University OpenScholar.
- Peter B. Clark & Steven A. Symansky & Tamim Bayoumi & Mark P. Taylor, 1994. "Robustness of Equilibrium Exchange Rate Calculations to Alternative Assumptions and Methodologies," IMF Working Papers 94/17, .
- Michael L. Mussa, 1984. "The Theory of Exchange Rate Determination," NBER Chapters, in: Exchange Rate Theory and Practice, pages 13-78 National Bureau of Economic Research, Inc.
- John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17, 03.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:95/55. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.