IDEAS home Printed from https://ideas.repec.org/p/kud/kuiedp/0010.html
   My bibliography  Save this paper

International Parity Relationships between Germany and the United States: A Joint Modelling Approach

Author

Listed:
  • Katarina Juselius

    (University of Copenhagen, Institute of Economics)

  • Ronald MacDonald

    (University of Strathclyde, Department of Economics)

Abstract

This paper examines the interrelations between the purchasing power parity, uncovered interest parity, the term structure of interest rates and the Fisher real interest rate parity using cointegration analysis. Dynamic adjustment and feed-back effects are estimated jointly in a full system of equations. An important finding is that the very slow, though significant, price adjustment towards sustainable levels of real exchange rates, has been compensated by corresponding changes in the spread of the long-term bond rates. Related to this is the strong empirical support for the weak exogeneity of the long-term bond rates, signifying the importance of the large US trade deficits (i.e. the low levels of US savings) and, hence, their linkage to international finance. Altogether, the results suggest that the transmission mechanisms over the post Bretton Woods period have been significantly different from standard theoretical assumptions.

Suggested Citation

  • Katarina Juselius & Ronald MacDonald, 2000. "International Parity Relationships between Germany and the United States: A Joint Modelling Approach," Discussion Papers 00-10, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:0010
    as

    Download full text from publisher

    File URL: http://www.econ.ku.dk/english/research/publications/wp/2000/0010.pdf/
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Chiarella, Carl, et al, 1984. "On the Economics of International Fisheries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 85-92, February.
    2. Datta, Manjira & Mirman, Leonard J., 1999. "Externalities, Market Power, and Resource Extraction," Journal of Environmental Economics and Management, Elsevier, pages 233-255.
    3. Easley, David & Spulber, Daniel F, 1981. "Stochastic Equilibrium and Optimality with Rolling Plans," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(1), pages 79-103, February.
    4. Amir, Rabah, 1996. "Continuous Stochastic Games of Capital Accumulation with Convex Transitions," Games and Economic Behavior, Elsevier, pages 111-131.
    5. Fischer, Ronald D. & Mirman, Leonard J., 1996. "The Compleat Fish Wars: Biological and Dynamic Interactions," Journal of Environmental Economics and Management, Elsevier, pages 34-42.
    6. Tracy R. Lewis & Richard Schmalensee, 1980. "On Oligopolistic Markets for Nonrenewable Natural Resources," The Quarterly Journal of Economics, Oxford University Press, pages 475-491.
    7. Dockner, Engelbert J. & Kaitala, Veijo, 1989. "On efficient equilibrium solutions in dynamic games of resource management," Resources and Energy, Elsevier, pages 23-34.
    8. Datta, Manjira & Mirman, Leonard J., 1999. "Externalities, Market Power, and Resource Extraction," Journal of Environmental Economics and Management, Elsevier, pages 233-255.
    9. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743.
    10. Perry, Martin K, 1984. "Scale Economies, Imperfect Competition, and Public Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 32(3), pages 313-333, March.
    11. Salant, Stephen W, 1976. "Exhaustible Resources and Industrial Structure: A Nash-Cournot Approach to the World Oil Market," Journal of Political Economy, University of Chicago Press, pages 1079-1093.
    12. Bergstrom, Theodore C, 1982. "On Capturing Oil Rents with a National Excise Tax," American Economic Review, American Economic Association, pages 194-201.
    13. Jonathan Cave, 1987. "Long-Term Competition in a Dynamic Game: The Cold Fish War," RAND Journal of Economics, The RAND Corporation, pages 596-610.
    14. David Levhari & Leonard J. Mirman, 1980. "The Great Fish War: An Example Using a Dynamic Cournot-Nash Solution," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 322-334, Spring.
    15. H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Journal of Political Economy, University of Chicago Press, pages 124-124.
    16. Lewis, Tracy R. & Schmalensee, Richard., 1979. "On oligopolistic markets for nonrenewable natural resources," Working papers 1052-79., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    International Parity Conditions;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kud:kuiedp:0010. 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: (Thomas Hoffmann). General contact details of provider: http://edirc.repec.org/data/okokudk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.