The long-run determination of the real exchange rate. Evidence from an intertemporal modelling framework using the dollar-pound exchange rate.
Date
2017-11Author
Litsios, Ioannis
Pilbeam, K
Subject
Real exchange rate Intertemporal model Asset prices Vector Error Correction Model
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Show full item recordAbstract
This paper develops a model of optimal choice over an array of different assets, including domestic and foreign bonds, domestic and foreign equities and domestic and foreign real money balances to examine the determination of the real exchange rate in the long-run. The model is tested empirically using data from the UK and the USA. The results show that all the coefficients of the model are right signed and significant and consequently financial assets may play a significant role in the determination of the real exchange rate.
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Publisher
Springer (part of Springer Nature)
Journal
Open Economies Review
Volume
28
Issue
5
Pagination
1011-1028
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