Some Evidenceon Exchange Rate Determination in Major Industrial Countries
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Summary:
This paper examines the role of long-run monetary and cyclical factors in determining exchange rate movements. Results of empirical study using a data set that includes Canada, Germany, Japan, the United Kingdom, and the United States support the view that exchange rate movements can be explained by the efficient or rational adjustment of foreign exchange markets to economic fundamentals. In the long run, the exchange rate is determined consistent with a monetary approach to exchange rates, while cyclical factors have an impact on short-run exchange rate dynamics. Estimated equations outperform random walk models of exchange rates.
Series:
Working Paper No. 1997/098
Subject:
Balance of payments Currency markets Current account balance Exchange rate arrangements Exchange rates Financial markets Foreign exchange Inflation Prices
English
Publication Date:
August 1, 1997
ISBN/ISSN:
9781451852103/1018-5941
Stock No:
WPIEA0981997
Pages:
38
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