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Effects of Fundamentals on the Exchange Rate: A Panel Analysis for a Sample of Industrialised and Emerging Economies

Jose Eduardo de A. Ferreira

Studies in Economics from School of Economics, University of Kent

Abstract: This paper tests the traditional monetary model of exchange rates for a sample of industrialized and emerging market economies by making use of panel techniques that allow for a high degree of heterogeneity across countries. The results demonstrated partial support for the monetary model for industrialised market economies but not for emerging ones. This constitutes a puzzle as it would expect countries with greater monetary instability to show a stronger association between exchange rates and monetary fundamentals.

Keywords: Foreign Exchange; Fundamentals; Panel Data; Unit Roots; Assets (search for similar items in EconPapers)
JEL-codes: F31 F37 F41 (search for similar items in EconPapers)
Date: 2006-07
New Economics Papers: this item is included in nep-cba, nep-fmk and nep-ifn
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