The relationship between the real exchange rate and balance of payments: empirical evidence for China from cointegration and causality testing

This article examines the relationship between the renminbi real exchange rate and China's foreign exchange reserves using cointegration and Granger causality testing. The main findings are that in the long run foreign exchange reserves Granger cause the real exchange rate. Meanwhile, in the short run there is unidirectional Granger causality running from foreign exchange reserves to the real exchange rate.

Volatility spillover between New Zealand stock market returns and exchange rate changes before and after the 1997 Asian financial crisis

Researchers in the last decade have been investigating the interdependence of stock returns and exchange rate changes within the same economy. Kanas (2000) and Yang and Doong (2004) find that for the G-7 countries, in general, the volatility of the stock market spills over to the exchange rate market but that volatility spillovers from the exchange rate market to the stock market are insignificant. Chen, Naylor, and Lu (2004) find that NZ individual firm returns are significantly exposed to exchange rate changes. This study complements their work by investigating the volatility spillover between the stock market and the foreign exchange market within the NZ economy.

An empirical analysis of the effects of the exchange rate on Canadian tourism

The effects of depreciation of the Canadian dollar on the Canadian tourist industry are estimated, and it is shown that the exchange rate had a modest impact in attracting U. S. visitors to Canada. However, the favorable exchange rate effects seem to be offset by other factors.

Exchange rate regime choice : some determinants and consequences

This thesis establishes that exchange rate regime choice is persistent for low-income and high-income countries. It also confirms the crucial role of capital account openness, financial development and product diversification as possible determinants of regime choice. Moreover, the thesis provides strong evidence that exchange rate regime influences fiscal discipline directly and through interaction with trade openness.

Does data frequency matter for the impact of forward premium on spot exchange rate?

In this paper we take the forward premium and exchange rate literature forward by asking whether data frequency matters in that relationship. We use four frequencies of data, namely, quarterly, monthly, weekly and daily. We find that data frequencies matter both statistically and economically. More specifically, we document that investors prefer the forward premium model over a constant returns model in most countries when models are estimated using daily, weekly, and quarterly data, but not when using monthly data.

Persistence, capital account openness, and financial sector health in exchange rate regime choice

This paper investigates empirically the persistence in exchange rate regimes as well as the role of capital account openness and financial sector health (measured by financial development and financial sector fragility) in exchange rate regime determination for a panel of 143 countries covering the post-Bretton Woods period. The results demonstrate that while low- and high-income countries exhibit highly persistent exchange rate regimes, middle-income countries display relatively lower persistence. For middle-income countries, capital account openness and the level of financial development play important roles in exchange rate regime choice. The fragility of the financial sector does not affect the exchange rate regime determination.