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Title: The Non-linear Dynamic Relationship between Exchange Rates and Macroeconomic Fundamentals in G-7 Countries
Authors: Lee, Chien-Chiang;Chang, Tsangyao;Lee, Chi-Chuan;Lin, Hsin-Yi
Contributors: 金融系;經濟系
Keywords: Exchange Rate;Macroeconomics
Date: 2010-07
Issue Date: 2015-09-15 14:43:06 (UTC+8)
Abstract: This paper explores the long-run and causality relationship between the exchange rate and macroeconomic fundamentals in G-7 countries, employing recently developed tests for the linear cointegration provided by Johansen (1988), the non-parametric cointegration method provided by Bierens (1997), as well as the non-linear Granger causality provided by Hiemstra and Jones (1994) and Diks and Panchenko (2006). The results for the Johansen (1988) test show that there is no evidence of a long-run cointegration relationship between the two variables. Conversely, Bierens (1997) provides clear support of a non-linear cointegration relationship. We also find that uni-directional causality exists, except for Canada, Germany, and the United Kingdom according to the Hiemstra and Jones (1994) test. However, the Diks and Panchenko (2006) test finds bi-directional causality in Canada, Germany, and United Kingdom, uni-directional causality running from the exchange rate to fundamentals in Italy, and uni-directional causality running from fundamentals to the exchange rate in Japan.
Relation: Journal of Economics and Management, 6(2), 203-228
Data Type: article
Appears in Collections:[金融學系] 期刊論文

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