Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/25210
Authors: 
Weber, Enzo
Year of Publication: 
2007
Series/Report no.: 
SFB 649 discussion paper 2007,038
Abstract: 
This paper demonstrates effects of economic convergence processes on the foreign exchange behaviour in a monetary modelling approach. Since the exchange rate represents the relative price of two currencies, commonness of stochastic trends between the fundamental determinants of supply and demand of the underlying monies restricts exchange rate movements to transitory fluctuations. In the spirit of optimal currency areas, this has the potential to serve as a criterion for an all-round integration of two economies. Empirically, such a constellation is found between Australia and New Zealand, whereas diverging trends in money and interest rates characterise the relation of Australia towards the US.
Subjects: 
Monetary Exchange Rate Model
Convergence
Stationarity
Australia
JEL: 
F31
F41
C32
Document Type: 
Working Paper

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