2016, Volume 69 - Issue 4
RSS feed citation: At RePEc
Publication date: 13 October 2016
EMU AND THE ANCHORING OF INFLATION EXPECTATIONSRead the article
COMPARISON OF THE FUNDAMENTAL AND MONETARY MODELS OF THE DETERMINANTS OF THE ARGENTINE PESO/US DOLLAR EXCHANGE RATERead the article
THE IMPACT OF RECENT CRISIS ON THE REAL ESTATE MARKET IN THE UAE: EVIDENCE FROM ASYMMETRIC METHODSRead the article
Yu HSING, Department of Management & Business Administration, College of Business, Southeastern Louisiana University, Hammond, LA, USA
Applying the demand and supply model, this paper finds that the ARS/USD exchange rate (units of the Argentine peso per U.S. dollar) is positively affected by the Argentine interest rate, U.S. real GDP, the U.S. Stock price, the Argentine inflation rate and the expected exchange rate, and it is negatively associated with the U.S. interest rate, Argentine real GDP, the Argentine stock price and the U.S. inflation rate. In the monetary models, the positive sign of the interest rate differential confirms the Frenkel-Bilson model, and the positive sign of the inflation rate differential confirms the Dornbusch-Frankel model. The demand and supply model exhibits a higher value of R-squared and a lower forecast error than monetary models.
Exchange Rates, Interest Rates, Real GDP, Stock Prices, Inflation Rates, EGARCH
Bilson, J.F.O. (1978), Rational expectations and the Exchange Rate, in: J. Frenkel, H. Johnson, (Eds), “The Economics of Exchange Rates”, Addison-Wesley Press: Reading.
Chinn, M. and R. Meese (1995), “Banking on Currency Forecasts: How Predictable is Change in Money?”, Journal of International Economics, 38(1-2), 161-178.
Cline, W.R. (2014), “Estimates of Fundamental Equilibrium Exchange Rates”, Policy Brief No. PB 14-16 May, Peterson Institute for International Economics.
Dekle, R., C. Hsiao and S. Wang (2002), “High Interest Rates and Exchange Rate Stabilization in Korea, Malaysia, and Thailand: An Empirical Investigation of the Traditional and Revisionist Views”, Review of International Economics, 10(1), 64-78.
Dornbusch, R. (1976), “Expectations and Exchange Rate Dynamics”, Journal of Political Economy, 84(6), 1161-1176.
Frankel, J.A. (1979), “On the Mark: A Theory of Floating Exchange Rates Based on Real Interest Differential”, American Economic Review, 69(4), 610-622.
Frenkel, J.A. (1976), “A Monetary Approach to the Exchange Rate: Doctrinal Aspects and Empirical Evidence”, Scandinavian Journal of Economics, 78(2), 200-224.
Huang, P., C.J. Hueng and R. Yau (2010), “Traditional View or Revisionist View? The Effects of Monetary Policy on Exchange Rates in Asia”, Applied Financial Economics, 20(9), 753-760.
Idil, U.Z. and M. Dalan (2009), “Monetary Approach to Exchange Rate Determination: The Case of Argentina, Brazil, Taiwan and Turkey, 1986-2006”, Applied Econometrics and International Development, 9(2), 53-62.
Lu, Y.C.R., T. Chang, C.C. Chiu and H.W. Tzeng (2011), “Revisiting Purchasing Power Parity for 16 Latin American Countries: Panel SURADF Tests”, Applied Economics Letters, 18(3), 251-255.
Mark, N.C. (1995), “Exchange Rates and Fundamentals: Evidence on Long-Horizon Predictability”, American Economic Review, 85(1), 201-218.
Meese, R. and K. Rogoff (1983), “Empirical Exchange Rate Models of the Seventies: Do They Fit Out of Sample?”, Journal of International Economics, 14(1), 3-24.
Naszodi, A. and R. Lieli (2014), “Testing the Asset Pricing Model of Exchange Rates with Survey Forecasts”, Working Paper.
Parks, K. (2014), “Argentine Peso Hits Record Lows: Rout Comes after Central Bank Reports Decline in Foreign Currency and Gold Reserves”, Wall Street Journal, September 16, <http://www.wsj.com/articles/argentine-peso-hits-record-lows-1410904124>.
Rogoff, K. (1999), “Monetary Models of Dollar/Yen/Euro Nominal Exchange Rates: Dead or Undead?”, The Economic Journal, 109(459), F655-F659.
Sarno, L. and E. Sojli (2009), “The Feeble Link between Exchange Rates and Fundamentals: Can we Blame the Discount Factor?”, Journal of Money, Credit and Banking, 41(2-3), 437-442.
Ucan, O., C.S. Akin and C. Aytun (2014), “Exchange Rate Determination in High Fragile Emerging Countries”, European Scientific Journal, 10(Special Edition Vol. 1), 361-368.