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Cointegration, structural breaks and monetary fundamentals of the Dollar/Yen Exchange

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  • Joscha Beckmann
  • Ansgar Belke
  • Michael Kühl

Abstract

This paper reexamines the empirical performance of monetary exchange rate models for the dollar/yen exchange rate. We focus on the character of a potential long-run relationship between exchange rates and fundamentals. Using monthly data from 1976:01 to 2007:12 this paper applies a novel time-varying coefficient approach which allows a distinction between breaks in the cointegration vector and instabilities in the adjustment coefficients. We are able to show that most of the observed breakpoints can be traced back to major policy changes or specific economic developments. Our findings also show that macroeconomic fundamentals do matter for the U.S. dollar/Japanese yen exchange rate, but in different ways over different periods of time. Copyright International Atlantic Economic Society 2011

Suggested Citation

  • Joscha Beckmann & Ansgar Belke & Michael Kühl, 2011. "Cointegration, structural breaks and monetary fundamentals of the Dollar/Yen Exchange," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 17(4), pages 397-412, November.
    • Handle: RePEc:kap:iaecre:v:17:y:2011:i:4:p:397-412:10.1007/s11294-011-9315-2
    DOI: 10.1007/s11294-011-9315-2
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    Cited by:

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    2. Joscha Beckmann & Ansgar Belke & Michael Kühl, 2015. "Foreign exchange market interventions and the $-¥ exchange rate in the long run," Applied Economics, Taylor & Francis Journals, vol. 47(38), pages 4037-4055, August.
    3. Chen, Pei-Fen & Zeng, Jhih-Hong & Lee, Chien-Chiang, 2018. "Renminbi exchange rate assessment and competitors' exports: New perspective," China Economic Review, Elsevier, vol. 50(C), pages 187-205.
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    More about this item

    Keywords

    Structural exchange rate models; Cointegration; Structural breaks; Switching regression; Time-varying coefficient approach; F30; G15;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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