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A standard monetary model and the variability of the deutschemark-dollar exchange rate

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  • West, Kenneth D.

Abstract

This paper uses a novel teat to see whether the Herse (1985) and Woo (1985) models are consistent with the variability of the deutschemark - dollar exchange rate 1974-1984. The answer, perhaps surprisingly, is yes. Both models, however, explain the month to month variability as resulting in a critical way from unobservable shocks to money demand and purchasing power parity. It would therefore be of interest in future work to model one or both of these shocks as explicit functions of economic variables.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 23 (1987)
Issue (Month): 1-2 (August)
Pages: 57-76

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Handle: RePEc:eee:inecon:v:23:y:1987:i:1-2:p:57-76

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Web page: http://www.elsevier.com/locate/inca/505552

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  10. Lars Peter Hansen & Robert J. Hodrick, 1983. "Risk Averse Speculation in the Forward Foreign Exchange Market: An Econometric Analysis of Linear Models," NBER Chapters, in: Exchange Rates and International Macroeconomics, pages 113-152 National Bureau of Economic Research, Inc.
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  23. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, Elsevier, vol. 14(1-2), pages 3-24, February.
  24. Maurice Obstfeld & Kenneth Rogoff, 1985. "Ruling Out Nonstationary Speculative Bubbles," NBER Working Papers 1601, National Bureau of Economic Research, Inc.
  25. McCallum, Bennett T, 1976. "Rational Expectations and the Natural Rate Hypothesis: Some Consistent Estimates," Econometrica, Econometric Society, Econometric Society, vol. 44(1), pages 43-52, January.
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