Journal article
Foreign Exchange Market Efficiency, Cointegration, and Policy Coordination
Applied economics letters, v 9(1), pp 61-68
01 Jan 2002
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Abstract
This paper examines market efficiency of the major foreign exchange markets during the post-Bretton Woods era by applying the bivariate and multivariate cointegration estimations to the weekly data of seven major foreign exchange rates. In particular, this study investigates whether the major foreign exchange policy coordinations, such as the Plaza Agreement (1985) and the Louvre Accord (1987), affected the long-run relations of the bilateral spot-forward and multivariate exchange rates. The findings of this study are: first, empirical evidence based on the bivariate and multivariate cointegrations is mostly consistent with the efficient market hypothesis in the major foreign exchange markets during the post-Bretton Woods era; second, the international policy coordinations during the late 1980s have affected across-country market efficiency by introducing common stochastic trends in the system of the seven major foreign exchange markets during the period of the policy implementation, but the market inefficiency did not last long; and third, within-country market efficiency appears to have become stronger in the post-Plaza agreement period than before, evidenced by exhibiting more cointegrating vectors, and have not been affected by the major foreign exchange policy coordinations.
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Details
- Title
- Foreign Exchange Market Efficiency, Cointegration, and Policy Coordination
- Creators
- Bang JeonEuiseong Lee
- Publication Details
- Applied economics letters, v 9(1), pp 61-68
- Publisher
- Taylor and Francis
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000173177200013
- Scopus ID
- 2-s2.0-0036157422
- Other Identifier
- 991019330808104721
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- Web of Science research areas
- Economics