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The impact of changes in monetary aggregates on exchange rate volatility in a developing country: Do structural breaks matter?

Andrew Ojede () and Eddery Lam ()

Economics Letters, 2017, vol. 155, issue C, 111-115

Abstract: Theoretical models of exchange rate determination predict that increases in monetary aggregates lead to depreciation. However, several empirical studies do find exchange rate response anomalies to innovations in monetary policy. In this paper, we show that accounting for major structural break points in monetary variables leads to empirical results that are statistically consistent with predictions from theoretical monetary models of exchange rate determination.

Keywords: Monetary aggregates; Exchange rate volatility; Endogenous structural breaks; Developing country (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:155:y:2017:i:c:p:111-115

DOI: 10.1016/j.econlet.2017.03.024

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