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on International Finance |
| By: | Yaprak Gulcan (Department of Economics, Faculty of Business, Dokuz Eylül University); Mustafa Erhan Bilman (Department of Economics, Faculty of Business, Dokuz Eylül University) |
| Abstract: | This study investigates the effect of budget deficit reduction on exchange rate between US dollar and Turkish lira (TL). Our article aims to illustrate that the evidence on the relationship between budget deficits and exchange rates is not clear-cut and to explain why the theoretical approaches that underlie the relationship are ambiguous while there is general agreement that cutting budget deficits and debt will lower interest rates. The relationship between deficit reduction and exchange rates has caused a debate among the most famous monetary policy makers and researchers. [Melvin (1989), Mishkin (1992), Greenspan (1995), Thiessen (1995), Krugman (1995), Feldstein (1995)] In addition, budget deficit can be counted as one of the most common and major problem that influences the macroeconomic stability in developing economies. In this sense, cointegration method and causality tests were used in order to find out the possible effects of budget deficit reduction on exchange rates during the period of 1960-2003 in Turkey. |
| Keywords: | Budget deficits, exchange rates, cointegration analysis |
| JEL: | H62 F31 |
| Date: | 2005–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:deu:dpaper:0507&r=ifn |
| By: | Copeland, Laurence (Cardiff Business School); Heravi, Saeed (Cardiff Business School) |
| Abstract: | We show that the behaviour of the real exchange rates of the UK, Germany, France and Japan has been characterised by structural breaks which changed the adjustment mechanism. In the context of a Time-Varying Smooth Transition AutoRegressive of the kind introduced by Lundbergh et al (2003), we show that the real exchange rate process shifted in the aftermath of Black Wednesday in the case of the Pound, in 1984-5 in the case of the Franc and, more tentatively, during the Asian crisis of 1997-8 in the case of the Yen. |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2006/21&r=ifn |
| By: | Saadet Kirbas Kasman (Department of Economics, Faculty of Business, Dokuz Eylül University); Adnan Kasman (Department of Economics, Faculty of Business, Dokuz Eylül University); Evrim Turgutlu (Department of Economics, Faculty of Business, Dokuz Eylül University) |
| Abstract: | This paper investigates the validity of the Fisher hypothesis using data from 33 developed and developing countries. Conventional cointegration tests do not provide strong evidence on the relationship between nominal interest rates and inflation. Therefore, we use fractional cointegration analysis to test the long-run relationship between the two variables. The results indicate that the long-run relationship between nominal interest rates and inflation do not exist for most countries in the sample when conventional cointegration test is employed. However, fractional cointegration between the two variables is found for a large majority of countries, implying the validity of the Fisher hypothesis. The results also indicate that the equilibrium errors display long memory. |
| Keywords: | Fisher hypothesis, interest rates, fractional cointegration, long memory |
| JEL: | E43 C22 |
| Date: | 2005–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:deu:dpaper:0504&r=ifn |
| By: | Frömmel, Michael; Schmidt, Torsten |
| Abstract: | We examine the dynamics of bank lending to the private sector for countries of the Euro area by applying a Markov switching error correction model. We identify for Belgium, Germany, Ireland and Portugal stable, mean reverting regimes and unstable regimes with no tendency to return to the long term credit demand equation, whereas for some other countries there is only weak evidence. Furthermore, for these as well as for other countries we detect in the less stable regimes a strong comovement with the development of the stock market. We interpret this as evidence for constraints in bank lending. In contrast, the banks' capital seems to have only marginal impact on the lending behaviour. |
| Keywords: | bank lending, credit demand, Euro area, Markov switching error correction, credit channel, asset prices, credit rationing |
| JEL: | C32 G21 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-342&r=ifn |