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Corresponding Author:
Yu Hsing, Department of Management & Business Administration, College of Business, Southeastern Louisiana University, Hammond, LA, USA

Comparison of the Fundamental and Monetary Models of the Determinants of the Argentine Peso/US Dollar Exchange Rate

Volume 69 - Issue 4, October 2016
(pp. 379-388)
JEL classification: F31, F41
Keywords: Exchange Rates, Interest Rates, Real GDP, Stock Prices, Inflation Rates, EGARCH

Abstract

Applying the demand and supply model, this paper finds that the ARS/USD exchange rate (units of the Argentine peso per U.S. dollar) is positively affected by the Argentine interest rate, U.S. real GDP, the U.S. Stock price, the Argentine inflation rate and the expected exchange rate, and it is negatively associated with the U.S. interest rate, Argentine real GDP, the Argentine stock price and the U.S. inflation rate. In the monetary models, the positive sign of the interest rate differential confirms the Frenkel-Bilson model, and the positive sign of the inflation rate differential confirms the Dornbusch-Frankel model. The demand and supply model exhibits a higher value of R-squared and a lower forecast error than monetary models.

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Bibliography

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Comparison of the Fundamental and Monetary Models of the Determinants of the Argentine Peso/US Dollar Exchange Rate

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Institute for International Economics of the Genoa Chamber of Commerce

Institute for International Economics
of the Genoa Chamber of Commerce