Role of Japan-US relative GDP and broad money supply in determining the yen-dollar exchange rate

Matiur Rahman, Mihajlo Balic and Charles B. Swindle

Global Business and Economics Review, 2005, vol. 7, issue 4, 311-323

Abstract: This paper analyses the role of relative GDP and broad money supply (M2) in the determination of the yen-dollar exchange rate. The sample period spans from the first quarter of 1988 to the second quarter of 2004. Standard cointegration procedures are applied. No clear evidence of a long-run equilibrium relationship exists among the variables. The estimates of the VAR model reveal short run causal flows from Japan-US relative GDP and relative broad money supply to the yen-dollar exchange rate with interactive feedbacks. The effects of the relative GDP on the yen-dollar exchange rate have no definitive patterns. The effects of the relative broad money supply are counterintuitive during this turbulent period of the Japanese economy.

Keywords: yen-dollar; exchange rate; relative GDP; broad money supply; stationarity; cointegration; granger causality; Japan; USA; United States; gross domestic product; Japanese economy. (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:ids:gbusec:v:7:y:2005:i:4:p:311-323

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