Cointegration, structural breaks and monetary fundamentals of the Dollar/Yen Exchange
Joscha Beckmann (),
Ansgar Belke and
Michael Kühl ()
International Advances in Economic Research, 2011, vol. 17, issue 4, 397-412
This paper reexamines the empirical performance of monetary exchange rate models for the dollar/yen exchange rate. We focus on the character of a potential long-run relationship between exchange rates and fundamentals. Using monthly data from 1976:01 to 2007:12 this paper applies a novel time-varying coefficient approach which allows a distinction between breaks in the cointegration vector and instabilities in the adjustment coefficients. We are able to show that most of the observed breakpoints can be traced back to major policy changes or specific economic developments. Our findings also show that macroeconomic fundamentals do matter for the U.S. dollar/Japanese yen exchange rate, but in different ways over different periods of time. Copyright International Atlantic Economic Society 2011
Keywords: Structural exchange rate models; Cointegration; Structural breaks; Switching regression; Time-varying coefficient approach; F30; G15 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:iaecre:v:17:y:2011:i:4:p:397-412:10.1007/s11294-011-9315-2
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