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Whither the Yen? Implications of an intertemporal model of the Yen/Dollar rate

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  • Menzie Chinn

    (University of California at Santa Cruz)

Abstract

This paper documents the evidence for a fiscal model of the Yen/Dollar real exchange rate over the 1974-1994 period. Cointegrating relationships between the real exchange rate and productivity, government spending and the real price of oil are estimated using the Johansen (1988) and Stock-Watson (1993) procedures. The neoclassical fixed-factors fiscal model of Rogoff (1992) is found to have some substantiation in the data. Estimates of the long-run equilibrium exchange rate indicate a current overvaluation of the Yen relative to the US Dollar of approximately 30%.

Suggested Citation

  • Menzie Chinn, 1995. "Whither the Yen? Implications of an intertemporal model of the Yen/Dollar rate," International Finance 9508001, University Library of Munich, Germany, revised 28 Aug 1995.
    • Handle: RePEc:wpa:wuwpif:9508001
    Note: International Finance yenxrate
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    References listed on IDEAS

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    Cited by:

    1. Canzoneri, Matthew B. & Cumby, Robert E. & Diba, Behzad, 1999. "Relative labor productivity and the real exchange rate in the long run: evidence for a panel of OECD countries," Journal of International Economics, Elsevier, vol. 47(2), pages 245-266, April.
    2. Guo, Qian & Hall, Stephen G., 2010. "A Test of the Balassa-Samuelson Effect Applied to Chinese Regional Data," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 57-78, July.
    3. Chinn, Menzie David, 1997. "Paper pushers or paper money? Empirical assessment of fiscal and monetary models of exchange rate determination," Journal of Policy Modeling, Elsevier, vol. 19(1), pages 51-78, February.

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    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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