TY - JOUR
T1 - On the dynamic relationship of exchange rates and monetary fundamentals
T2 - An impulse-response analysis by local projections
AU - Ho, Tsung Wu
N1 - Funding Information:
This article is a brief version of a research project financially sponsored by the National Science Committee of Taiwan (NSC 94-2415-H-128-002-).
PY - 2008
Y1 - 2008
N2 - Meese and Rogoff (1983) first examined the dynamic relationship between exchange rates and monetary fundamentals and indicated that monetary fundamentals do not contain predictive component of exchange rates changes at short horizon. This note re-examines this relationship by estimating the local projections (Jorda, 2005) to calculate the responses of the exchange rate to monetary fundamental impulse. As a result, we confirm the dynamic relationship: Evidence from both cubic and linear projections show that monetary fundamentals contain information of future exchange rate changes.
AB - Meese and Rogoff (1983) first examined the dynamic relationship between exchange rates and monetary fundamentals and indicated that monetary fundamentals do not contain predictive component of exchange rates changes at short horizon. This note re-examines this relationship by estimating the local projections (Jorda, 2005) to calculate the responses of the exchange rate to monetary fundamental impulse. As a result, we confirm the dynamic relationship: Evidence from both cubic and linear projections show that monetary fundamentals contain information of future exchange rate changes.
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U2 - 10.1080/13504850600993689
DO - 10.1080/13504850600993689
M3 - Article
AN - SCOPUS:56149126007
SN - 1350-4851
VL - 15
SP - 1141
EP - 1145
JO - Applied Economics Letters
JF - Applied Economics Letters
IS - 14
ER -