Title: Comparison of the fundamental and monetary models of the Canadian dollar/US dollar exchange rate

Authors: Yu Hsing

Addresses: Department of Management and Business Administration, College of Business, Southeastern Louisiana University, Hammond, Louisiana 70402, USA

Abstract: This paper finds that a higher real interest rate differential, a higher output ratio and a higher differential of the government deficit as a percent of GDP cause the Canadian dollar to depreciate whereas a higher stock price ratio, a higher productivity ratio, and a higher commodity price cause the Canadian dollar to appreciate. In comparison, the fundamental model performs better than the monetary models in both the in-sample and out-of-sample forecasts.

Keywords: exchange rates; interest rates; GDP; gross domestic product; stock prices; inflation rates; productivity; government deficit; Canada; USA; United States; Canadian dollar; US dollar; interest rate differential; output ratio; stock price ratio; commodity prices.

DOI: 10.1504/IJEBR.2017.081779

International Journal of Economics and Business Research, 2017 Vol.13 No.1, pp.22 - 29

Received: 15 Jun 2016
Accepted: 01 Oct 2016
Published online: 24 Jan 2017 *

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