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Bulletin of Monetary Economics and Banking

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.

First Page

263

Last Page

286

Creative Commons License

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

Country

Nigeria

Affiliation

Central Bank of Nigeria

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