On the Japanese Yen-U.S. Dollar Exchange Rate: A Structural Econometric Model Based on Real Interest Differentials

Ronald MacDonald, Jun Nagayasu

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)

Abstract

In this paper the short- and long-run movements of the Japanese yen-U.S. dollar exchange rate are modeled for the recent floating period. The modern general-to-specific approach is used as our econometric framework. In contrast to some other exchange rate studies, we attempt to interpret multiple cointegrating vectors using economic theory. Amongst our findings are sensible and significant long-run relationships and dynamic equations which describe the motion of the two exchange rates and which satisfy a battery of diagnostic tests. Our models are shown to produce good in-sample forecasting performance and also an out-of-sample forecasting performance which dominates a random walk.J. Japan. Int. Econ.,March 1998,12(1), pp. 75-102. Department of Economics, University of Strathclyde, Curran Building, 100 Cathedral Street, Glasgow G4 0LN, United Kingdom.Copyright 1998 Academic Press. Journal of Economic LiteratureClassification Numbers C53, F31, F47.

Original languageEnglish
Pages (from-to)75-102
Number of pages28
JournalJournal of the Japanese and International Economies
Volume12
Issue number1
DOIs
Publication statusPublished - 1998 Mar 1
Externally publishedYes

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

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