Exchange rate behavior of Canada, Japan, the United Kingdom and the United States
We revisit a significant research topic on exchange rate behavior by restating the test procedures with an appropriate econometric methodology to re-examine three aspects. (i) Does the inflation (price) factor affect nominal exchange rate? (ii) Do relative interest rates affect a country’s exchange...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Springer
2016
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| Online Access: | http://psasir.upm.edu.my/id/eprint/43369/ http://psasir.upm.edu.my/id/eprint/43369/1/Exchange%20rate%20behavior%20of%20Canada%2C%20Japan%2C%20the%20United%20Kingdom%20and%20the%20United%20States.pdf |
| _version_ | 1848850210301673472 |
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| author | Syed Mohamed, Mohamed Ariff Zarei, Alireza |
| author_facet | Syed Mohamed, Mohamed Ariff Zarei, Alireza |
| author_sort | Syed Mohamed, Mohamed Ariff |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | We revisit a significant research topic on exchange rate behavior by restating the test procedures with an appropriate econometric methodology to re-examine three aspects. (i) Does the inflation (price) factor affect nominal exchange rate? (ii) Do relative interest rates affect a country’s exchange rate? (iii) Do the price and interest rate effects hold if controls for non-parity factors are embedded in tests? The quarterly data series for this study are taken over 55 years. The traditional parity condition model with price and interest rate as criterion variables is extended to take into account recently-verified non-parity factors, namely trade, productivity and foreign reserves. The results affirm that both parity factors and also the non-parity factors significantly affect the exchange rates of Canada, Japan, the United Kingdom and the United States. In our view, these findings relating to four free-floating currencies help extend our knowledge on how currency behavior is consistent with parity and non-parity theorems using a relevant methodological approach in this study. |
| first_indexed | 2025-11-15T10:02:40Z |
| format | Article |
| id | upm-43369 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T10:02:40Z |
| publishDate | 2016 |
| publisher | Springer |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-433692016-05-19T01:26:58Z http://psasir.upm.edu.my/id/eprint/43369/ Exchange rate behavior of Canada, Japan, the United Kingdom and the United States Syed Mohamed, Mohamed Ariff Zarei, Alireza We revisit a significant research topic on exchange rate behavior by restating the test procedures with an appropriate econometric methodology to re-examine three aspects. (i) Does the inflation (price) factor affect nominal exchange rate? (ii) Do relative interest rates affect a country’s exchange rate? (iii) Do the price and interest rate effects hold if controls for non-parity factors are embedded in tests? The quarterly data series for this study are taken over 55 years. The traditional parity condition model with price and interest rate as criterion variables is extended to take into account recently-verified non-parity factors, namely trade, productivity and foreign reserves. The results affirm that both parity factors and also the non-parity factors significantly affect the exchange rates of Canada, Japan, the United Kingdom and the United States. In our view, these findings relating to four free-floating currencies help extend our knowledge on how currency behavior is consistent with parity and non-parity theorems using a relevant methodological approach in this study. Springer 2016 Article PeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/43369/1/Exchange%20rate%20behavior%20of%20Canada%2C%20Japan%2C%20the%20United%20Kingdom%20and%20the%20United%20States.pdf Syed Mohamed, Mohamed Ariff and Zarei, Alireza (2016) Exchange rate behavior of Canada, Japan, the United Kingdom and the United States. Open Economies Review, 27 (2). pp. 341-357. ISSN 0923-7992; ESSN: 1573-708X http://link.springer.com/article/10.1007%2Fs11079-015-9372-x 10.1007/s11079-015-9372-x |
| spellingShingle | Syed Mohamed, Mohamed Ariff Zarei, Alireza Exchange rate behavior of Canada, Japan, the United Kingdom and the United States |
| title | Exchange rate behavior of Canada, Japan, the United Kingdom and the United States |
| title_full | Exchange rate behavior of Canada, Japan, the United Kingdom and the United States |
| title_fullStr | Exchange rate behavior of Canada, Japan, the United Kingdom and the United States |
| title_full_unstemmed | Exchange rate behavior of Canada, Japan, the United Kingdom and the United States |
| title_short | Exchange rate behavior of Canada, Japan, the United Kingdom and the United States |
| title_sort | exchange rate behavior of canada, japan, the united kingdom and the united states |
| url | http://psasir.upm.edu.my/id/eprint/43369/ http://psasir.upm.edu.my/id/eprint/43369/ http://psasir.upm.edu.my/id/eprint/43369/ http://psasir.upm.edu.my/id/eprint/43369/1/Exchange%20rate%20behavior%20of%20Canada%2C%20Japan%2C%20the%20United%20Kingdom%20and%20the%20United%20States.pdf |