|
|
| Volume 5, No. 2,
August 2006 |
Back |
|
The
Monetary Model of the Dollar-Yen Exchange Rate Determination:
A Cointegration Approach |
|
|
|
M. Faizul Islam |
|
|
Department of
Management Studies, Southeastern University, U.S.A. |
|
Mohammad S. Hasan |
|
|
Faculty of
Organisation and Management, Sheffield Hallam University, U.K. |
|
|
| Abstract |
|
|
|
|
This paper
validates the monetary model in the determination of the
dollar-yen exchange rate by applying cointegration methodology.
Estimation results indicate a stationary relationship between
the dollar-yen exchange rate and monetary models, with long-term
causality flowing from monetary variables to the dollar-yen
exchange rate. The forecasting performance of the monetary model
based on the error-correction model outperforms random walk
models. |
|
|
|
Key words:
cointegration; error-correction model; exchange rate; |
|
monetary model; random walk model |
| JEL
classification:
F31;
F41 |
|
|
Back |