Costas Karfakis

Exchange Rates, Interest Rates and Current Account News: Some Evidence from Australia

This paper investigates the Australian current account announcement effects on exchange rates and interest rates for the period July 1985 to December 1992. The results indicate that the Australian dollar depreciates and interest rate rise as a result of an announcement of larger than expected current account deficit, which is consistent with the portfolio balance effect. In addition, significant structural breaks are found and the analysis shows that after December 1989 the current news affect neither exchange rates nor interest rates.

Testing the quantity theory of money in Greece

This paper tests two monetarist hypotheses on the Greek data: (1) the predictability of income velocity of money; and (2) the proportionality postulate between nominal income (or, prices) and money. The unit root tests with structural breaks show that the velocity of narrow money can be characterized as a stationary process. The Autoregressive Distributed Lag (ARDL) approach to cointegration indicates that the proportionality postulate between nominal income (or, prices) and money is supported by the data. This evidence suggests that shocks which affect the money supply are reflected in the nominal income (or, prices) in a similar way, thus velocity will not fluctuate widely and its movements will be predictable.

MONETARY POLICY AND THE VELOCITY OF MONEY IN GREECE: A COlNTEGRATION APPROACH

Long run real money demand and velocity function for the narrow monetary aggregate M1 are tested by means of the cointegration approach developed by Johansen and Juselius (1990). The results support the existence of a systematic relationship between M1-velocity, the rate of interest and the exchange rate. An interesting aspect of the trivariate error correction vector autoregressive analysis is the evidence of bidirectional causality between the exchange rate and velocity. Furthermore, changes in the rate of interest provide information that helps predict future movements of M1-velocity. Finally, the results derived from Engle and Granger (1987) two-step procedure suggest that M1-velocity is subject to control through policy-induced interest rate and exchange rate movements, thus justifying the adoption of M1 as a useful monetary target.

Modeling the Australian Dollar-US Dollar Exchange Rate Using Cointegration Techniques

This paper examines the link between the Australian dollars exchange rate and Australias terms of trade. The US

The information content of the yield curve in Australia

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Testing the quantity theory of money in Greece: reply to Özmen

rate is found to be cointegrated with the terms of trade, and the relationship between the two variables appears to be robust. An estimated error-correction model for changes in the nominal US

ON THE STABILITY OF THE LONG-RUN MONEY DEMAND IN GREECE

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Exchange Rate Convergence and Market Efficiency

is shown to have reasonable out-of-sample predictive powers. Weak exogeneity tests within the Johansen framework indicate highly significant causality running from the terms of trade to the exchange rate but less significant causality running from the exchange rate to the terms of trade. Copyright 1999 by Blackwell Publishing Ltd.

Is there an empirical link between the dollar price of the euro and the monetary fundamentals

This paper examines the expectation theory of the term structure of interest rates in Australia by looking at the information content of the yield curve. Cointegration results provide evidence that the slope coefficient of the yield curve is unity. Bivariate vector autoregressive analysis (VAR) indicates that the spread between the long term and the short term rates is informative about changes in the short rate. In addition, the spread between the short term rate and the official cash rate has predictive power for changes in the cash rate. These findings imply that the Reserve Bank of Australia could influence the long term rate by intervening on the official cash rate. Finally, the efficient market restrictions were tested and accepted by the data.

Exchange rate determination during hyperinflation: the case of the Romanian lei

Özmen (Applied Economics Letters, 10, 971–4, 2003) re-examines money exogeneity in Greece using data from Karfakis (Applied Economics, 34, 583–7, 2002) and claims, contrary to Karfakis, that money exogeneity is rejected. This reply demonstrates that money exogeneity is sensitive to lag length specification.