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Title: |
How Real Are Real Exchange Rates? |
| Author: |
Kim, Yoonbai |
| Author
Affiliation: |
U KY |
| Source: |
International Economic Journal, Spring 1997, v. 11, no. 1, pp. 87-108 |
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Publication Date: |
Spring 1997 |
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Abstract: |
This paper analyzes the role of real
disturbances in the real dollar exchange rates of the mark, yen and the
pound both during the post-1973 float and in the long-run historical
data. The results indicate dominant roles of real shocks in all three
exchange rates in the post-1973 float although a substantial portion of
short-run variations in the mark and yen contains monetary
characteristics. In the long historical data, real shocks are far less
important explaining only a small portion of nominal exchange rate
movements and 50 to 80 percent of real exchange rate movements. The
analysis is based on the Mundell-Fleming-Dornbusch model as the
structural model and the multivariate method of time series
decomposition to incorporate the long-run invariance of the real
exchange rate with respect to monetary shocks. |
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