Role of non parity fundamentals in exchange rate determination: Australia and the asia pacific region

Catherine S F Ho, M. Ariff

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    Abstract

    This paper extends the literature by looking at the contribution of non parity variables after extracting the impact of parity variables on exchange rates of Australia and the Asia Pacific countries. Exchange rates are examined using high- and low-frequency multi-country panel time series data for a group of trade related nations in the Asia Pacific. Our findings suggest that exchange rate is affected by growth rate, and trade and capital flows. Other less significant variables include sovereign debt, balance of payments, money supply, and trade openness. It also confirms that interest rate has a significant effect on exchange rates while price effect is not significant in short-run regressions. These key findings are robust across different time intervals, thus revealing new findings on the exchange rate dynamics consistent with theory.

    Original languageEnglish
    Pages (from-to)45-69
    Number of pages25
    JournalMalaysian Journal of Economic Studies
    Volume45
    Issue number1
    Publication statusPublished - Jun 2008

    Fingerprint

    Parity
    Exchange rates
    Exchange rate determination
    Asia-Pacific region
    Asia-Pacific
    Capital flows
    Balance of payments
    Time series data
    Short-run
    Exchange rate dynamics
    Trade flows
    Interest rates
    Money supply
    Price effects
    Trade openness
    Sovereign debt

    Cite this

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    Role of non parity fundamentals in exchange rate determination : Australia and the asia pacific region. / Ho, Catherine S F; Ariff, M.

    In: Malaysian Journal of Economic Studies, Vol. 45, No. 1, 06.2008, p. 45-69.

    Research output: Contribution to journalArticleResearchpeer-review

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