The Monetary Exchange Rate Model as a Long-Run Phenomenon
1998-07-15
Research Paper
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Pure time series-based tests fail to find empirical support for monetary exchange rate models. In this paper we apply pooled time series estimation on a forward-looking monetary model, resulting in parameter estimates which are in compliance with the underlying theory. Based on a panel version of the Engle and Granger (1987) two-step procedure we find that the residuals of our pooled estimated model are stationary. This indicates that on a pooled time series level there is cointegration between the exchange rate and the macroeconomic fundamentals of this monetary model.
Keywords
Classifications using
Journal of Economic Literature (JEL) Classification System
- F30 : International Finance: General
- G15 : International Financial Markets
- C23 : Models with Panel Data
Automatically Extracted Terms
- exchange
- model
- cointegration
- exchange rates
- panel
- country
- dollar exchange rates
- 1.00
- exchange rate model
- power
- cross-section
- value
- money
- series
- estimate
- correlation
- regression
- residual
- dollar
- result
