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Longer Data, Less “CHEER”—Case Study of Yen-Dollar Exchange Rate

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DOI: 10.4236/me.2019.109129    59 Downloads   137 Views
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ABSTRACT

This paper compares CHEER approach in both short-run (since 1973) and long-run (since 1870) with the yen-dollar exchange rate. The most important result is that CHEER is valid only in the period when the international capital market is developed enough. Historical data will render the interest rate parity insignificant and thus CHEER will fail. Also, the paper demonstrates that when either PPP or UIP fails, modification of the cointegration variables improves the power of the CHEER test.

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Zhao, Y. , Guo, S. and Ye, Z. (2019) Longer Data, Less “CHEER”—Case Study of Yen-Dollar Exchange Rate. Modern Economy, 10, 2051-2062. doi: 10.4236/me.2019.109129.

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