Predictable Movements in Yen/DM Exchange Rates

August 1, 2000

Preview Citation

Format: Chicago

Janet Kong. Predictable Movements in Yen/DM Exchange Rates, (USA: International Monetary Fund, 2000) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the relevance of PPP, the adjustment channel of real exchange rate and the predictability of the movement in nominal exchange rate by studying the behavior of yen/DM exchange rate, using cointegration method. Results support PPP and find that the real exchange rate is mean-reverting. The change in the nominal exchange rate exhibits significant auto-regressive property. These findings imply that movements in the nominal yen/DM exchange rate is actually predictable. The error-correction model and a simple first order autoregressive model both outperform the random walk model in out-of-sample forecasting.

Subject: Exchange rates, Export price indexes, Foreign exchange, Prices, Purchasing power parity, Real exchange rates, Wholesale price indexes

Keywords: Auto regression, Deutsche mark, Exchange rate, Exchange rate forecast, Exchange rates, Exchange-rate movement, Export price index, Export price indexes, Long-run PPP, Market PPP hypothesis, PPP, PPP exchange rate, Purchasing power parity, Real exchange rates, Wholesale price indexes, WP

Publication Details

Pages:

36
Volume:

---
DOI:

---
Issue:

---
Series:

Working Paper No. 2000/143
Stock No:

WPIEA1432000
ISBN:

9781451856330
ISSN:

1018-5941

FACTSHEETS

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

IMF Working Papers