Asset Market and Balance of Payments Characteristics: An Eclectic Exchange Rate Model for the Dollar, Mark, and Yen

Ronald MacDonald

No 1995/055, IMF Working Papers from International Monetary Fund

Abstract: In this paper we use an exchange rate model that combines asset market characteristics with balance of payments interactions to examine the nominal effective exchange rates of the German mark, Japanese yen, and U.S. dollar for the recent experience with floating exchange rates. Our approach may be interpreted as one which attempts to flesh out the missing links that arise in conditioning an exchange rate solely on relative prices, as occurs in a standard PPP analysis. In contrast to much other empirical exchange rate modeling, our approach explicitly involves the use of a current account sustainability term. Amongst the findings reported in this paper are: significant, and sensible, long-run relationships for all of the currencies studied; appealing short-run dynamics for two of the currencies; and a finding that the Japanese effective exchange rate closely tracks the long-run exchange rate defined in this paper.

Keywords: WP; mn mathvariant; U.S. dollar; correlation coefficient; balance of payments; modeling exercise; price configuration; price level; excess demand; nominal exchange rate movement; exchange rate depreciation; asset market approach; parsimonious exchange rate model; short-run exchange rate change; time series; critical value; Exchange rates; Purchasing power parity; Exchange rate modelling; Real exchange rates; Exchange rate assessments (search for similar items in EconPapers)
Pages: 38
Date: 1995-06-01
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=1120 (application/pdf)

Related works:
Journal Article: Asset Market and Balance of Payments Characteristics: An Eclectic Exchange Rate Model for the Dollar, Mark and Yen (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1995/055

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().