Opin vísindi

Old shocks cast long shadows over the exchange rate

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dc.contributor Háskóli Íslands
dc.contributor University of Iceland
dc.contributor.author Egilsson, Jón
dc.date.accessioned 2020-10-08T11:05:50Z
dc.date.available 2020-10-08T11:05:50Z
dc.date.issued 2019-04-16
dc.identifier.citation 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
dc.identifier.issn 1514-0326
dc.identifier.issn 1667-6726 (eISSN)
dc.identifier.uri https://hdl.handle.net/20.500.11815/2099
dc.description Publisher's version (útgefin grein)
dc.description.abstract 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.
dc.format.extent 196-218
dc.language.iso en
dc.publisher Informa UK Limited
dc.relation.ispartofseries Journal of Applied Economics;22(1)
dc.rights info:eu-repo/semantics/openAccess
dc.subject Exchange rate
dc.subject Interest rate
dc.subject IRD
dc.subject Monetary policy
dc.subject UIP
dc.subject Gengismál
dc.subject Vextir
dc.subject Peningastefna
dc.title Old shocks cast long shadows over the exchange rate
dc.type info:eu-repo/semantics/article
dcterms.license 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.
dc.description.version Peer Reviewed
dc.identifier.journal Journal of Applied Economics
dc.identifier.doi 10.1080/15140326.2019.1597328
dc.relation.url https://www.tandfonline.com/doi/full/10.1080/15140326.2019.1597328
dc.contributor.department Hagfræðideild (HÍ)
dc.contributor.department Faculty of Economics (UI)
dc.contributor.school Félagsvísindasvið (HÍ)
dc.contributor.school School of Social Sciences (UI)

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