Financial Premium and Real Exchange Rate Misalignment

Research output: Contribution to journalArticle

Abstract

The literature overwhelmingly believes that the size of a financial premium could be an indicator of the extent of the real exchange rate misalignment under dual exchange rates. We wish to oppose this view. The strategy in this paper is to investigate the effects that monetary and real shocks from domestic or foreign origin have on these variables. We also extend the analysis of the theoretical model by discussing numerical simulations. Both theoretical and numerical examinations together show that such a relationship does not exist. Moreover, we find that the more volatile the financial premium, the more stable the real exchange rate.

Original languageEnglish
Pages (from-to)139-161
Number of pages23
JournalJournal of Economics/ Zeitschrift fur Nationalokonomie
Volume78
Issue number2
DOIs
Publication statusPublished - 2003 Feb 1

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Real exchange rate
Misalignment
Premium
Exchange rates
Numerical simulation

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)
  • Economics and Econometrics

Cite this

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Financial Premium and Real Exchange Rate Misalignment. / Wang, Fuhmei.

In: Journal of Economics/ Zeitschrift fur Nationalokonomie, Vol. 78, No. 2, 01.02.2003, p. 139-161.

Research output: Contribution to journalArticle

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