Asset market and balance of payments characteristics: an eclectic exchange rate model for the dollar, mark and yen

MacDonald, R. (1999) Asset market and balance of payments characteristics: an eclectic exchange rate model for the dollar, mark and yen. Open Economies Review, 10(1), pp. 5-29. (doi:10.1023/A:1008382709501)

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Abstract

In this paper we use an exchange rate model, which combines asset market characteristics with balance of payments interactions, to examine the nominal effective exchange rates of the German mark, Japanese yen and US 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. Amongst the results reported in this paper are: significant, and sensible, long-run relationships for the currencies studied; complex short-run dynamics; a variance decomposition analysis which apportions nominal exchange rate error variances into real and nominal elements.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:MacDonald, Professor Ronald
Authors: MacDonald, R.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Open Economies Review
Publisher:Springer
ISSN:0923-7992
ISSN (Online):1573-708X

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