Long-run determination of the nominal exchange rate in the presence of national debts: Evidence from the yen-dollar exchange rate
K. Pilbeam and
Working Papers from Department of Economics, City University London
This paper develops an intertemporal optimization model to examine the determinants of the nominal exchange rate in the long run. The model is tested empirically using data from the Japan and the USA. The proposed theoretical specification is well supported by the data and shows that relative national debts as well as monetary and financial factors may play a significant role in the determination of the long-run nominal exchange rate between the yen and the dollar.
Keywords: Nominal exchange rate; intertemporal optimization; national debt; asset prices; co-integration (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:cty:dpaper:18/01
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