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The purpose of this article is to analyse methods for determination of exchange rates in response to fundamental economic variables and changes in monetary policies.

The paper undertakes empirical examination of exchange rate movements and their structural changes in response to changes in macroeconomic variables and monetary policies in the USA, the Euro area, and Japan.

Exchange rates have been influenced by macroeconomic fundamentals and have been impacted by the conduct of monetary policies in some cases. Some structural changes in exchange rates have coincided with implementation of drastic monetary policies but not in others. The Japanese quantitative easing policy has had an effect on exchange rates.

Monetary policy has been often examined; however, few studies have examined the response of exchange rate movements to monetary policies. Moreover, structural changes in exchange rates are examined in comparison with domestic monetary policies in the USA, the Euro Area, and Japan.

This paper, using daily data, sets out to present an empirical analysis of the relationship between recent Japanese stock prices and macroeconomic variables under the quantitative easing policy in Japan.

The theoretical framework of the analysis is provided followed by application of the empirical method and analysis of the deterministic elements of stock prices in Japan. Vector error correction method is applied.

The results indicate that interest rates, especially the domestic interest rate, have not impacted Japanese stock prices. Exchange rates also have not been a significant determinant of Japanese stock prices. US stock prices have significantly influenced Japanese stock prices. Moreover, there exists a long‐term stable relationship between Japanese and US stock market prices.

The Bank of Japan's monetary policy, especially quantitative monetary easing, has not yet been fully determined. The effect of the policy on stock prices has not been discussed at all. Analyzing this effect is important because of its impact on the Japanese economic recovery, which has prevailed for more than ten years. Moreover, little research exists on the effect of the exchange rate on stock prices. This paper uses daily data. Some past studies on this topic have used quarterly or monthly data.

This paper aims to analyze Islamic rates of return, conventional interest rates in the Malaysian deposit markets, and Kuala Lumpur Interbank Offered Rate (KLIBOR) rates in the short-term money market from the view point of co-movement and transmission.

The non-stationary time series models such as cointegration and Granger causality tests are applied to analyze the daily data.

Islamic rates of return and conventional interest rates co-move in the Malaysian deposit market. The Islamic rates of return propel conventional interest rates in the three-, six-, and 12-month maturities. Islamic rates of return and conventional interest rates form a short-term money market with KLIBOR rates.

The author analyzes econometrically the sample period from May 16, 2005 to January 12, 2012. This paper concentrates on the period after the development of Islamic banking in Malaysia.

Islamic and conventional deposit markets are competitive in Malaysia; in particular, the competition in the one-month deposit market is very keen. Islamic rates of return have more impact on the formation of short-term interest rates than conventional interest rates.

This paper makes three contributions to the related literatures. First, it uses daily data in the maturities of one month, three months, six months and 12 months for its analyses. Second, it uses the Granger causality method of Toda and Yamamoto to avoid the issue of the non-stationarity of the data. The results of the Granger causality tests in this paper are different from related literatures. Third, this paper focuses on the relationship of KLIBOR rates and Islamic rates of return, and of KLIBOR rates and conventional interest rates.