publication . Article . 2005

empirical investigation of the effects of the fundamentals on the exchange rate

Castro, Juan R.;
Open Access
  • Published: 01 Apr 2005 Journal: Revista Latinoamericana de Desarrollo Económico (issn: 2074-4706, eissn: 2309-9038, Copyright policy)
  • Publisher: Universidad Catolica Boliviana San Pablo
Abstract
<jats:p>This paper examines, by using several econometric techniques, the effects of foreign reserves and other fundamental variables on the exchange rate using the target zone theory. This paper uses monthly data for Chile from January 1979 to November 1997. The data used consists of foreign reserves, credit from the Central Bank, domestic reserves, imports, exports, claims on government, GDP, foreign liabilities, domestic and foreign interest rate. We find that the interest differential does not have any effect on depreciation, rejecting the target zone implication that the domestic interest rate can be used to manage the exchange rate. We find that foreign re...
Subjects
free text keywords: Exchange; Rate; Econometric; Chile, Economics, Monetary economics, Interest rate parity, Foreign-exchange reserves, Depreciation, Sterilization (economics), Covered interest arbitrage, Interest rate, media_common.quotation_subject, media_common, Foreign exchange risk, Exchange rate, jel:Z00
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publication . Article . 2005

empirical investigation of the effects of the fundamentals on the exchange rate

Castro, Juan R.;