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Testing for nonlinear Granger causality from fundamentals to exchange rates in the ERM

Ma, Yue, Kanas, Angelos (2000) Testing for nonlinear Granger causality from fundamentals to exchange rates in the ERM. Journal of International Financial Markets, Institutions and Money, 10 (1). pp. 69-82. ISSN 1042-4431. (doi:10.1016/s1042-4431(99)00025-6) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:41176)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided.
Official URL:
https://doi.org/10.1016/s1042-4431(99)00025-6

Abstract

This paper presents evidence that two ERM exchange rates are Granger caused in a nonlinear fashion by relative money supply. This finding can be interpreted as evidence that the underlying relationship between money and exchange rates is nonlinear in a target-zone arrangement, which is consistent with the target-zone literature introduced by Krugman, 1991. Target zones and exchange rate dynamics, Q. J. Econ. 106 (3), 669-682. Moreover, we find weak or no evidence that relative output nonlinearly Granger causes the exchange rate. Thus, relative money is more important than relative output in explaining the nonlinearity in the exchange rate-fundamentals relationship. © 2000 Elsevier Science B.V. All rights reserved.

Item Type: Article
DOI/Identification number: 10.1016/s1042-4431(99)00025-6
Uncontrolled keywords: Exchange rates, Fundamentals, Nonlinear causality, Target-zones
Subjects: H Social Sciences > HG Finance
Divisions: Divisions > Kent Business School - Division > Kent Business School (do not use)
Depositing User: Tracey Pemble
Date Deposited: 23 May 2014 09:31 UTC
Last Modified: 09 Mar 2023 11:33 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/41176 (The current URI for this page, for reference purposes)

University of Kent Author Information

Kanas, Angelos.

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