The theory of exchange rate determination clearly links a depreciating currency to a deteriorating trade balance, interest differential and related economic fundamentals. Empirical testing carried out routinely confirms these relationships in “normal†times as currencies constantly...

This study employs the cointegrating VAR approach to characterise the relationships between the five exchange rates comprising the TWI and the share market in New Zealand. Weekly data covering January 1999 to June 2006 are analysed. The study discovers there are two types of long-run...