An Approach for Determining Exchange Rates: The Mixture of the Purchasing Power Parity Model and the Chartist Model
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Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute

Economics and Business

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asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
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Published: 04 March 2024

An Approach for Determining Exchange Rates: The Mixture of the Purchasing Power Parity Model and the Chartist Model

Yutaka Kurihara

Aichi University, Japan

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, management journal

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doi

10.31014/aior.1992.07.01.566

Pages: 152-159

Keywords: Exchange rate, Japan, Price, PPP (PPP), US

Abstract

In the medium- and long-run, prices rather than interest rates are thought to have an effect on exchange rates, and the purchasing power parity (PPP) theory, which posits as a determining factor in exchange rates, has been used not only in academic fields but also in practice. This study considers that exchange rates are determined by the mixture of past exchange rates and the PPP theory. On the other hand, it is often pointed out that the actual exchange rate diverges significantly from the exchange rate derived from the PPP theory. Moreover, this study hypothesizes that when the deviation becomes large, there will be a movement to correct the deviation. The empirical estimations show that when the deviation is large, such movement cannot be found and when the deviation is small, there is a movement toward correction.

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