Asset markets and the exchange rate: a structural model of the Sterling‐Dollar rate 1972–1982

Kearney, C. and MacDonald, R. (1985) Asset markets and the exchange rate: a structural model of the Sterling‐Dollar rate 1972–1982. Journal of Economic Studies, 12(3), pp. 3-20. (doi:10.1108/eb002597)

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Abstract

This article formulates, estimates and simulates a structural model of the sterling‐dollar exchange rate over the floating rate period. A critique of existing empirical implementations of the asset‐market approach is followed by formulating a small structural model which augments a carefully specified asset sector with a real sector so that output and prices are determined endogenously along with interest rates, foreign reserves and the exchange rate. The model is estimated on quarterly data using Two Stage Least Squares and Zellner's Seemingly Unrelated Regression Procedure. Some policy simulations illustrate the response of the sterling‐dollar rate to various shocks.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:MacDonald, Professor Ronald
Authors: Kearney, C., and MacDonald, R.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Economic Studies
Publisher:Emerald Group Publishing Limited
ISSN:0144-3585

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