A model of the term structure of interest rates in an open economy with regime shifts

Article Abstract:

The target zone model assuming devaluation risk and real exchange rate showed that an imperfect credibility of an exchange rate target influences short-term interest rates while an imperfect credibility in inflation's target boosts long-term interest rates. The real exchange rate factor was useful in explaining real interest rates and real asset returns. It also enabled the study of the term structure behavior in various exchange rate regimes such as target zone regimes.

Econometrics & Model Building, Econometrics, Business models

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Modeling non-linearities in real effective exchange rates

Article Abstract:

Non-linearities existing in the exchange rate process are usually the result of heterogeneity of the participants in the foreign exchange market. An economic model was made to test ten currencies of major industrial countries for the existence of non-linearities in real effective exchange rates. The research utilized the smooth transition autoregressive family of models to prove the existence of non-linear dependencies in these major world currencies.

Administration of General Economic Programs, Economic Statistics & Research, Foreign Exchange & Reserves Policy, Research, Economic conditions, Economic indicators, Nonlinear theories

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Who drives real interest rates around the Pacific Rim: the USA or Japan?

Article Abstract:

The effects of US and Japanese real interest rates on the local rates of Pacific Rim countries are studied using a multivariate cointegration model. Results show that real rates in Hong Kong, Malaysia and Taiwan are cointegrated with both US and Japanese rates. Singapore is solely linked with US rates while Indonesian, South Korean and Thai rates are cointegrated with Japanese rates.

United States, Japan, International aspects, Pacific Rim

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