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According to the equation the rate of growth of nominal exchange rates increases with the increase in inflation differential and falls with the appreciation of the real exchange rates.

3 Data Description数据说明

For the analysis of the long run nominal exchange rates, I have used the yearly data from 2001-2003. I have secured the data from Economic and Social data service, IMF data and statistics and PENN tables. I have taken two datasets. The first excludes the countries which lack an autonomous exchange rate policy. These countries follow a pegged exchange rate policy. The second includes these countries. This has been done to examine whether the exclusion of these countries lead to a noteworthy change in the results.

My data has 128 observations and 6 variables. These include Nominal Exchange rate, Gross Domestic Product, GDP per capita, openness, political stability and terms of trade. The variables and their sources are described below:

Nominal Exchange rate: I have taken the data for official exchange rate which refers to the exchange rate determined by national authorities or to the rate determined in the legally sanctioned exchange market. It is calculated as an annual average based on monthly averages. For estimating the long run change in nominal exchange rate, I have taken the average annual log change in the nominal exchange rate against the US Dollar over 2001-2003. The shorthand reference for the variable is NER.

Source: International Monetary Fund, International Financial Statistics.

Gross Domestic Product: It is defined as the measure of economy's output. It is measured in billions of US Dollars. GDP has been used as a proxy for country size. The shorthand reference is GDP. To examine the effect of gdp on long run change in nominal exchange rates, the datapoints comprise of the change in GDP.

Source: IMF data & statistics.

* GDP per capita: It has been used to analyse the effect of economy's growth on the long run change on the nominal exchange rates. For this purpose I have taken the data for Annual percentage growth rate of GDP per capita based on constant local currency. The shorthand reference is GPC

Source: World Bank national accounts data, and OECD National Accounts data files.

Openness: It is defined as exports plus imports divided by GDP or the total trade as a percentage of GDP. The export & import figures are in national currencies from the World Bank and United Nations data archives. The shorthand reference for this variable is OP.

Political Stability: Data for this variable has been taken from World Bank, worldwide governance indicators, 1996-2008. The unit in which the variable is measured follow a normal dist本论文由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。