Exchange Rates and Monetary Fundamentals: What Do We Learn from Linear and Nonlinear Regressions?

<table class="table-group" id="tab2"><tr><td><table class="table"><tr><td class="thead-hr" colspan="5"><hr/></td></tr><tr class="thead"><td align="left"> </td><td align="center">Level <svg height="11.9702pt" id="M56" style="vertical-align:-5.76004pt" version="1.1" viewbox="-0.0498162 -6.21016 11.651 11.9702" width="11.651pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.0135,0,0,-0.0135,0,0)"><path d="M471 456L444 459C426 433 414 430 388 430C324 430 270 434 216 434C103 434 51 374 23 338L43 317C96 366 146 380 221 375L154 109C149 86 147 68 147 52C147 4 168 -12 197 -12C240 -12 291 25 334 71L320 96C295 75 268 58 252 58C238 58 227 79 238 138C251 211 272 296 292 372C310 372 332 368 350 368C391 368 421 369 434 371C444 388 455 413 471 456Z" id="g113-241"></path><glyph.data ascent="3473" descent="-2876" horiz-adv-x="483" vert-adv-y="483"></glyph.data></g><g transform="matrix(.0095,0,0,-0.0095,5.663,3.264)"><path d="M546 97L529 123C499 91 459 65 450 65C443 65 439 73 445 106C468 226 496 341 523 451H513L436 424C423 357 412 311 403 276C356 195 245 59 190 59C165 59 158 99 166 135L236 445L227 451L152 428L60 18C43 -58 24 -145 24 -183C24 -237 43 -257 66 -257C96 -257 123 -236 130 -224L129 -216C115 -205 96 -156 96 -102C96 -57 105 -7 113 26H115C127 -1 137 -12 158 -12S198 -5 230 19C284 60 332 117 385 186H387C381 154 378 142 370 107C347 1 367 -12 388 -12C422 -12 492 32 546 97Z" id="g50-234"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="564" vert-adv-y="564"></glyph.data></g></svg></td><td align="center">1st difference <svg height="11.9702pt" id="M57" style="vertical-align:-5.76004pt" version="1.1" viewbox="-0.0498162 -6.21016 11.651 11.9702" width="11.651pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.0135,0,0,-0.0135,0,0)"><path d="M471 456L444 459C426 433 414 430 388 430C324 430 270 434 216 434C103 434 51 374 23 338L43 317C96 366 146 380 221 375L154 109C149 86 147 68 147 52C147 4 168 -12 197 -12C240 -12 291 25 334 71L320 96C295 75 268 58 252 58C238 58 227 79 238 138C251 211 272 296 292 372C310 372 332 368 350 368C391 368 421 369 434 371C444 388 455 413 471 456Z" id="g113-241"></path><glyph.data ascent="3473" descent="-2876" horiz-adv-x="483" vert-adv-y="483"></glyph.data></g><g transform="matrix(.0095,0,0,-0.0095,5.663,3.264)"><path d="M546 97L529 123C499 91 459 65 450 65C443 65 439 73 445 106C468 226 496 341 523 451H513L436 424C423 357 412 311 403 276C356 195 245 59 190 59C165 59 158 99 166 135L236 445L227 451L152 428L60 18C43 -58 24 -145 24 -183C24 -237 43 -257 66 -257C96 -257 123 -236 130 -224L129 -216C115 -205 96 -156 96 -102C96 -57 105 -7 113 26H115C127 -1 137 -12 158 -12S198 -5 230 19C284 60 332 117 385 186H387C381 154 378 142 370 107C347 1 367 -12 388 -12C422 -12 492 32 546 97Z" id="g50-234"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="564" vert-adv-y="564"></glyph.data></g></svg></td><td align="center">Level <svg height="9.63795pt" id="M58" style="vertical-align:-3.42779pt" version="1.1" viewbox="-0.0498162 -6.21016 11.0322 9.63795" width="11.0322pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.0135,0,0,-0.0135,0,0)"><path d="M471 456L444 459C426 433 414 430 388 430C324 430 270 434 216 434C103 434 51 374 23 338L43 317C96 366 146 380 221 375L154 109C149 86 147 68 147 52C147 4 168 -12 197 -12C240 -12 291 25 334 71L320 96C295 75 268 58 252 58C238 58 227 79 238 138C251 211 272 296 292 372C310 372 332 368 350 368C391 368 421 369 434 371C444 388 455 413 471 456Z" id="g113-241"></path><glyph.data ascent="3473" descent="-2876" horiz-adv-x="483" vert-adv-y="483"></glyph.data></g><g transform="matrix(.0095,0,0,-0.0095,5.663,3.264)"><path d="M487 458L455 460C436 434 425 433 397 433C331 433 279 437 225 437C103 437 52 374 24 338L49 312C100 363 152 379 229 374C210 308 184 213 163 117C158 94 156 74 156 58C156 6 180 -12 211 -12C261 -12 313 27 348 68L332 99C307 76 285 64 267 64C252 64 236 86 250 148L301 373C320 373 344 369 364 369C399 369 435 370 450 372C458 386 470 411 487 458Z" id="g50-241"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="499" vert-adv-y="499"></glyph.data></g></svg></td><td align="center">1st difference <svg height="9.63795pt" id="M59" style="vertical-align:-3.42779pt" version="1.1" viewbox="-0.0498162 -6.21016 11.0322 9.63795" width="11.0322pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.0135,0,0,-0.0135,0,0)"><path d="M471 456L444 459C426 433 414 430 388 430C324 430 270 434 216 434C103 434 51 374 23 338L43 317C96 366 146 380 221 375L154 109C149 86 147 68 147 52C147 4 168 -12 197 -12C240 -12 291 25 334 71L320 96C295 75 268 58 252 58C238 58 227 79 238 138C251 211 272 296 292 372C310 372 332 368 350 368C391 368 421 369 434 371C444 388 455 413 471 456Z" id="g113-241"></path><glyph.data ascent="3473" descent="-2876" horiz-adv-x="483" vert-adv-y="483"></glyph.data></g><g transform="matrix(.0095,0,0,-0.0095,5.663,3.264)"><path d="M487 458L455 460C436 434 425 433 397 433C331 433 279 437 225 437C103 437 52 374 24 338L49 312C100 363 152 379 229 374C210 308 184 213 163 117C158 94 156 74 156 58C156 6 180 -12 211 -12C261 -12 313 27 348 68L332 99C307 76 285 64 267 64C252 64 236 86 250 148L301 373C320 373 344 369 364 369C399 369 435 370 450 372C458 386 470 411 487 458Z" id="g50-241"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="499" vert-adv-y="499"></glyph.data></g></svg></td></tr><tr><td class="thead-hr" colspan="5"><hr/></td></tr><tr><td align="left">Series of Japan</td><td align="center"> </td><td align="center"> </td><td align="center"> </td><td align="center"> </td></tr><tr><td align="left"> <svg height="9.63795pt" id="M60" style="vertical-align:-3.42779pt" version="1.1" viewbox="-0.0498162 -6.21016 9.46293 9.63795" width="9.46293pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.0135,0,0,-0.0135,0,0)"><path d="M391 364C391 409 353 448 295 448C249 448 198 426 152 393C65 331 23 225 23 139C23 14 96 -12 146 -12C198 -12 280 9 367 101L351 124C300 78 242 48 194 48C129 48 109 107 109 162V191C208 213 391 266 391 364ZM313 350C313 305 268 261 113 223C132 334 187 381 217 398C227 404 244 405 261 405C290 405 313 385 313 350Z" id="g113-102"></path><glyph.data ascent="3473" descent="-2876" horiz-adv-x="414" vert-adv-y="414"></glyph.data></g><g transform="matrix(.0095,0,0,-0.0095,5.541,3.264)">&lt;path id="g50-117" d="M329 433H203L239 587L230 596L147 534L123 433H57L30 395L34 388H115L61 129C37 16 59 -12 85 -12C147 -12 222 58 260 98L241 125C212 95 160 62 144 62C132 62 127 71 138 126L192 386L305 394L329 433Z"</g></svg></td></tr></table></td></tr></table>

Tests for a unit root in the data (cases of Japanese Yen, Euro, and USD).

Economics Research International

tab2

Table 2

Table 2: Exchange Rates and Monetary Fundamentals: What Do We Learn from Linear and Nonlinear Regressions? 