On the Japanese Yen–U.S. Dollar exchange rate: a structural econometric model based on real interest differentials

MacDonald, R. and Nagayasu, J. (1998) On the Japanese Yen–U.S. Dollar exchange rate: a structural econometric model based on real interest differentials. Journal of the Japanese and International Economies, 12(1), pp. 75-102. (doi:10.1006/jjie.1997.0389)

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Abstract

In this paper the short- and long-run movements of the Japanese yen–U.S. dollar exchange rate are modeled for the recent floating period. The modern general-to-specific approach is used as our econometric framework. In contrast to some other exchange rate studies, we attempt to interpret multiple cointegrating vectors using economic theory. Amongst our findings are sensible and significant long-run relationships and dynamic equations which describe the motion of the two exchange rates and which satisfy a battery of diagnostic tests. Our models are shown to produce good in-sample forecasting performance and also an out-of-sample forecasting performance which dominates a random walk.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:MacDonald, Professor Ronald
Authors: MacDonald, R., and Nagayasu, J.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of the Japanese and International Economies
Publisher:Elsevier
ISSN:0889-1583
ISSN (Online):1095-8681

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