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Monetary Economics中美元和英镑汇率分析

论文作者:英语论文论文属性:学期论文 termpaper登出时间:2014-12-05编辑:yangcheng点击率:6902

论文字数:7222论文编号:org201412042315019709语种:英语论文 English地区:马来西亚价格:免费论文

关键词:汇率分析Exchange Rate美元和英镑transaction costs




Analysis Of The Dollar And Pound Exchange Rate

Purchasing power parity (PPP) states that in the absence of transaction costs and barriers to trade, the nominal exchange rate between two countries should equate the aggregate price levels of the respective countries. Since its formal introduction in 1918 by Gustav Cassel as a means of stabilising the exchange rates of the major countries after WW1, PPP theory has been extensively scrutinised and investigated by researchers to determine its relevance as a practical theory in exchange rate determination. Starting with the testing of the most basic relationship of PPP in the 1970s till the recent use of more advanced econometric techniques like Co-integration or Fractional Integration, the results gathered from the numerous literature have not been consistent. But even with the mixed results, there was always belief by academia or interested parties that the PPP holds the potential to be the cornerstone for the determination of exchange rates. As a result this paper attempts to join the plentiful literature on PPP, by investigating the convergence of long run PPP for two of most advanced economies in the world, United States of America and United Kingdom respectively. Co-integration and Johansen test have been correspondingly employed to the data set that spans from 1968 to 2010. The findings from both tests were contrasting where Co-integration advocating that PPP does not hold in the long run while Johansen Co-integration test shows the existence of one co-integrating relationship. Nevertheless, this result is consistent with existing literature where different econometric models have produced different results, even on similar dataset.

1. Introduction

Purchasing Power Parity (PPP) points out that in the absence of transaction costs and barriers to trade, the nominal exchange rate between two countries should be equal to the aggregate price levels of the respective countries. Although the term Purchasing Power Parity (PPP) was apparently first proposed by Gustav Cassel in 1918 as a means of stabilising the overly-inflated exchange rates of major industrialised countries after World War 1, the origination of the underlying idea has a history dating back to the Spanish scholars of 15th & 16th centuries. To the scholars, PPP serve as reliable measure to comprehend the interaction between the trade between the Spanish and other economies and the monetary impact on the exchange rate. But to current users of this theory, PPP offers an easily understood economic theory for the determination of exchange rate and the relation of the countries’ price level to exchange rate.

Since its introduction, PPP theory has been extensively scrutinised and investigated but results have not been consistent. Even with the contrasting literature, there was always belief that the PPP theory holds the potential to the theoretical solution to exchange rate determination. Dornbusch and Krugman (1976) mentioned that “Under 论文英语论文网提供整理,提供论文代写英语论文代写代写论文代写英语论文代写留学生论文代写英文论文留学生论文代写相关核心关键词搜索。

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