Research ArticleOpen AccessGoogle Scholar indexed
Longer Data, Less “CHEER”—Case Study of Yen-Dollar Exchange Rate
School of Business, East China University of Science and Technology, Shanghai, China
China Academy of Public Finance and Public Policy, CUFE, Beijing, China
School of Business, East China University of Science and Technology, Shanghai, China
- 1 School of Business, East China University of Science and Technology, Shanghai, China
- 2 China Academy of Public Finance and Public Policy, CUFE, Beijing, China
- 3 School of Business, East China University of Science and Technology, Shanghai, China
Modern Economy·Volume 10 (2019)·Pages 2051–2062·Published 11 September 2019·DOI10.4236/me.2019.109129
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Abstract
This paper compares CHEER approach in both short-run (since 1973) and long-run (since 1870) with the yen-dollar exchange rate. The most important result is that CHEER is valid only in the period when the international capital market is developed enough. Historical data will render the interest rate parity insignificant and thus CHEER will fail. Also, the paper demonstrates that when either PPP or UIP fails, modification of the cointegration variables improve s the power of the CHEER test.
KeywordsPPPUIPCHEERExchange Rate
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