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Alternative approaches to real exchange rates and real interest rates: three up and three down
Author(s) -
Edison Hali J.,
Melick William R.
Publication year - 1999
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/(sici)1099-1158(199904)4:2<93::aid-ijfe93>3.0.co;2-r
Subject(s) - economics , exchange rate , real interest rate , interest rate , interest rate parity , econometrics , monetary economics
This paper examines the relationship between real exchange rates and real interest rates using three different approaches across four currencies and two horizons with 20 years of data. Each approach gives some encouragement that this relationship might hold, but each approach also encounters problems establishing the form or usefulness of the relationship. On balance, this paper contributes to the literature by finding more encouraging results than in earlier studies, but it still remains to be demonstrated that the real exchange rate–real interest rate relationship is the linchpin to explaining exchange rate movements. Copyright © 1999 John Wiley & Sons, Ltd.