The Role of National Debts in the Determination of the Yen‐dollar Exchange Rate

Litsios, Ioannis; Pılbeam, Keith

doi:10.1111/ecin.12735

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2023

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Cited by 2 publications

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“…Although the use of government bond yields and other related fiscal effects in exchange rate models has tended to be limited, recently, Litsios and Pilbeam (2019) have developed a long-run model of the nominal exchange rate, which incorporates the levels of government debt relative to GDP. Based on the monetary approach to the exchange rate, they show that the government debt to GDP ratio has a significant and negative effect on the domestic currency.…”

Section: Introductionmentioning

confidence: 99%

Forecasting the exchange rate with the Taylor rule model during times of alternative monetary policies

Wang

Morley

2023

Journal of Forecasting

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This study aims to incorporate the effects of recently used alternative monetary policies, such as quantitative easing into standard Taylor rule exchange rate models. Using out-of-sample forecasting, we determine whether including long-term government bond yields and shadow interest rates improves on these model's performance. Using data from the Eurozone, Japan, UK and USA, we perform out of sample forecasts using a rolling window, the results suggest that the model with government bond returns performs best against the random walk, although the results vary across countries, particularly when we compare the forecasts with those produced by a version of UIP.

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Section: Introductionmentioning

confidence: 99%