Titill: | Old shocks cast long shadows over the exchange rate |
Höfundur: | |
Útgáfa: | 2019-04-16 |
Tungumál: | Enska |
Umfang: | 196-218 |
Háskóli/Stofnun: | Háskóli Íslands University of Iceland |
Svið: | Félagsvísindasvið (HÍ) School of Social Sciences (UI) |
Deild: | Hagfræðideild (HÍ) Faculty of Economics (UI) |
Birtist í: | Journal of Applied Economics;22(1) |
ISSN: | 1514-0326 1667-6726 (eISSN) |
DOI: | 10.1080/15140326.2019.1597328 |
Efnisorð: | Exchange rate; Interest rate; IRD; Monetary policy; UIP; Gengismál; Vextir; Peningastefna |
URI: | https://hdl.handle.net/20.500.11815/2099 |
Tilvitnun:Jón Helgi Egilsson (2019) Old shocks cast long shadows over the exchange rate, Journal of Applied Economics, 22:1, 196-218, DOI: 10.1080/15140326.2019.1597328
|
|
Útdráttur:We propose a new exchange rate model using interest rate differential (IRD) time series as the input, and we fit the new model with empirical data for calibration. We assume that exchange rate modeling cannot be based on the response to a single shock but must instead be based on the response to a series of shocks, as previous shocks could still be playing out and affecting the overall response. We extend the Dornbusch overshooting model and make adjustments to account for empirical findings. The new model is substantiated by empirical data from several currency areas and can explain the so-called exchange rate “puzzles”. Based on the model, we derive a relationship that explains when no IRD will suffice to support a stable exchange rate, which also suggests when policy-makers could be tempted to widen the IRD continually.
|
|
Athugasemdir:Publisher's version (útgefin grein)
|
|
Leyfi:This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial License (http://creativecom
mons.org/licenses/by-nc/4.0/), which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the
original work is properly cited.
|