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The relationship between exchange rates and interest rate differentials : A wavelet approach
Jönköping International Business School (JIBS).
Jönköping International Business School (JIBS).
Jönköping International Business School (JIBS).
2012 (English)In: The World Economy, ISSN 0378-5920, E-ISSN 1467-9701, Vol. 35, no 9, 1162-1185 p.Article in journal (Refereed) Published
Abstract [en]

This paper uses wavelet analysis to investigate the relationship between the spot exchange rate and  interest rate differential for seven pairs of countries, with a small country, Sweden, included in each case. The key empirical results show that there tends to be a negative relationship between the spot exchange rate (domestic-currency price of foreign currency) and the nominal interest rate differential (approximately the domestic interest rate minus the foreign interest rate) at the shortest time scales, while a positive relationship is shown at the longest time scales. This indicates that among models of exchange rate determination using the asset approach, the sticky-price models are supported in the short-run and flexible-price models in the long-run.

Place, publisher, year, edition, pages
2012. Vol. 35, no 9, 1162-1185 p.
National Category
Economics
Research subject
Economy, Economics
Identifiers
URN: urn:nbn:se:lnu:diva-41671DOI: 10.1111/j.1467-9701.2012.01466.xOAI: oai:DiVA.org:lnu-41671DiVA: diva2:800262
Available from: 2015-04-02 Created: 2015-04-02 Last updated: 2017-04-19Bibliographically approved

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Karlsson, Hyunjoo Kim
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Citation style
  • apa
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