The Long-Run Relationship Between Real Exchange Rates and Real Interest Rate Differentials: A Panel Study
IMF Working Papers, March 1, 1999
Source details
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- The Long-Run Relationship Between Real Exchange Rates and Real Interest Rate Differentials: A Panel Study
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Bibliographic details
- Authors: Jun Nagayasu, Ronald MacDonald
- Published: March 1, 1999
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451845556.001
Summary and Main Findings
- The paper empirically examines the long-run relationship between real exchange rates and real interest rate differentials over the recent floating exchange rate period, using a panel cointegration method, with data for a set of industrialized countries.
- The paper finds evidence of statistically significant long-run relationships and plausible point estimates.
- The findings contrast with much existing evidence; the paper suggests that the failure of others to establish such relationships may reflect the estimation method they use rather than any inherent deficiency of the fundamentals-based models.
Authors and Date
- By Jun Nagayasu, Ronald MacDonald
- March 1, 1999
Methodology
- Panel cointegration method.
- Use of panel ADF statistic and references to the method of Johansen and integration tests as part of the methodological framework.
Subjects and Keywords
- Subject: Currencies, Exchange rates, Financial services, Foreign exchange, Long term interest rates, Money, Real exchange rates, Real interest rates
- Keywords: ADF statistics, Currencies, exchange rate relationship, exchange rate-real interest rate differential, Exchange rates, exchange Rates-Long-Run interest rates, integration method, integration test, Long term interest rates, math, method of Johansen, panel ADF statistic, panel cointegration, Real exchange rates, real interest rates, WP
Contextual Notes
- This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
Content derived from IMF web landing page for the working paper "The Long-Run Relationship Between Real Exchange Rates and Real Interest Rate Differentials: A Panel Study".