Comparison of the fundamental and monetary models of the Canadian dollar/US dollar exchange rate

Yu Hsing

International Journal of Economics and Business Research, 2017, vol. 13, issue 1, 22-29

Abstract: This paper finds that a higher real interest rate differential, a higher output ratio and a higher differential of the government deficit as a percent of GDP cause the Canadian dollar to depreciate whereas a higher stock price ratio, a higher productivity ratio, and a higher commodity price cause the Canadian dollar to appreciate. In comparison, the fundamental model performs better than the monetary models in both the in-sample and out-of-sample forecasts.

Keywords: exchange rates; interest rates; GDP; gross domestic product; stock prices; inflation rates; productivity; government deficit; Canada; USA; United States; Canadian dollar; US dollar; interest rate differential; output ratio; stock price ratio; commodity prices. (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijecbr:v:13:y:2017:i:1:p:22-29

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