EXCHANGE RATE AND INTEREST RATE DIFFERENTIAL IN G7 ECONOMIES

Authors

Peter Golit, Central Bank of Nigeria, NigeriaFollow
Afees Salisu, Ton Duc Thang University, VietnamFollow
Akinwunmi Akintola, Central Bank of Nigeria, NigeriaFollow
Faustina Nsonwu, Central Bank of Nigeria, NigeriaFollow
Itoro Umoren, Central Bank of Nigeria, NigeriaFollow

Document Type

Article

Abstract

We offer new insights on the dynamics of the exchange rate–interest rate differentialfor the case of G7 economies. We show that the nexus is better considered using anasymmetric model, as suggested by a host of previous studies. In addition, we find therole of accounting for structural breaks to be prominent. We also show differences in thenexus between euro and non-euro G7 countries, suggesting heterogeneous monetarypolicies. Thus, we document the strongest evidence for the sticky price hypothesis inJapan and lesser evidence in the euro countries and the United Kingdom, with Canadaconsistently revealing evidence for the flexible price hypothesis.

Recommended Citation

Golit, Peter; Salisu, Afees; Akintola, Akinwunmi; Nsonwu, Faustina; and Umoren, Itoro (2019) "EXCHANGE RATE AND INTEREST RATE DIFFERENTIAL IN G7 ECONOMIES," Bulletin of Monetary Economics and Banking: Vol. 22: No. 3, Article 1.
DOI: https://doi.org/10.21098/bemp.v22i3.1147
Available at: https://bulletin.bmeb-bi.org/bmeb/vol22/iss3/1

First Page

263

Last Page

286

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

Nigeria

Affiliation

Central Bank of Nigeria