Identifying Linear Restrictions on the Monetary Exchange Rate Model and the Uncovered Interest Parity: Cointegration Evidence from the Canadian-U.S. Dollar
AbstractIn this paper, the long-run validity of the monetary model for the Canadian-U.S. dollar is reexamined. The time-series properties of the variables are examined with the use of nonseasonal and seasonal unit root and stationarity tests, and it is shown that they are I(1) processes with no seasonal effects. Two significant cointegration vectors are discovered using Johansen's methodology, but the system is found to be overidentified and, hence, the authors are unable to assign the monetary model with either vector. Parameter stability of Johansen's results is tested using the recursive methodology developed by H. Hansen and S. Johansen (1993).
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 30 (1997)
Issue (Month): 4 (November)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
Web page: http://economics.ca/cje/
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Other versions of this item:
- George Kouretas, . "Identifying Linear Restrictions On The Monetary Excange Rate Model And The Uncovered Interest Parity: Cointegration Evedence From The Canadian - U.S. Dollar," Working Papers 9511, University of Crete, Department of Economics.
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- Panayiotis Diamantis & Dimitris Georgoutsos & George Kouretas, 2001. "The Monetary Approach in the Presence of I(2) Components: A Cointegration Analysis of the Official and Black Market for Foreign Currency in Latin America," Working Papers 0108, University of Crete, Department of Economics.
- Adawo, Monday A. & Effiong, Ekpeno L., 2013. "Monetary exchange rate model as a long-run phenomenon: evidence from Nigeria," MPRA Paper 46407, University Library of Munich, Germany.
- Panayiotis Diamantis & Dimitris Georgoutsos & George Kouretas, .
"The Monetary Approach To The Exchange Rate: Long-Run Relationships, Identification And Temporal Stability,"
9507, University of Crete, Department of Economics.
- Diamandis, Panayiotis F. & Georgoutsos, Dimitris A. & Kouretas, Georgios P., 1998. "The Monetary Approach to the Exchange Rate: Long-Run Relationships, Identification and Temporal Stability," Journal of Macroeconomics, Elsevier, vol. 20(4), pages 741-766, October.
- Lee, Chin & Law, Chee-Hong, 2013. "The Effects of Trade Openness on Malaysian Exchange Rate," MPRA Paper 45185, University Library of Munich, Germany.
- David O. Cushman, 2000. "The failure of the monetary exchange rate model for the Canadian-U.S. dollar," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 591-603, August.
- Nejib Hachicha, 2003. "Capital Inflows-National Saving Dynamics in Tunisia: Evidence from Cointegration, Weak Exogeneity and Simultaneous Error Correction Modelling," International Economic Journal, Taylor & Francis Journals, vol. 17(4), pages 43-60.
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