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Regime linkages in the US/UK real exchange rate-real interest differential relation

Kanas, Angelos (2005) Regime linkages in the US/UK real exchange rate-real interest differential relation. Journal of International Money and Finance, 24 (2). pp. 257-274. ISSN 0261-5606. (doi:10.1016/j.jimonfin.2004.12.006) (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)

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. (Contact us about this Publication)
Official URL
http://dx.doi.org./10.1016/j.jimonfin.2004.12.006

Abstract

Using a multivariate regime switching framework and focusing on the period 1921-2002, which is characterized by different nominal exchange rate regimes, and monetary regimes, we find supportive evidence of the US/UK real exchange rate-real interest differential relation, in terms of volatility regime dependence. The two variables are jointly characterized by high volatility during periods of floating exchange rates, and by low volatility during periods of fixed exchange rates, thereby suggesting that the nominal exchange rate regime is the driving force behind the volatility regime switching. Thus, allowing for regime switching in the real exchange rate-real interest differential relation bridges the gap between popular theories of real exchange rate determination, which predict such a relation, and previous empirical studies, which failed to uncover such a relation for the US/UK real exchange rate. © 2004 Elsevier Ltd. All rights reserved.

Item Type: Article
DOI/Identification number: 10.1016/j.jimonfin.2004.12.006
Additional information: Unmapped bibliographic data: AD - Department of Economics, University of Crete, 74100 Rethymnon Crete, Greece [Field not mapped to EPrints] JA - J. Int. Money Financ. [Field not mapped to EPrints]
Uncontrolled keywords: Real exchange rate, Real interest differential, Regime switching, UK, US
Subjects: H Social Sciences > HG Finance
H Social Sciences > HJ Public Finance
Divisions: Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Tracey Pemble
Date Deposited: 22 May 2014 12:02 UTC
Last Modified: 11 Jun 2019 10:39 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/41134 (The current URI for this page, for reference purposes)
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