Prices and Exchange Rate of Hellenic Drachma (GRD), during 1981-
AbstractThe paper presents empirical results on an import prices equation to the case of the small open Hellenic economy, during her course to the European Monetary Union, in the 1980s until mid-1990s. The analysis employs cointegration theory to examine the long-run co-movements of prices, effective exchange rate of GRD and unit labour cost of the European countries, which export to Greece. Innovation accounting is also used so as to detect the dynamics of the data set. We found slight evidence to support long run equilibrium, however, it was only the Hellenic inflation rate, which was adjusting to the deviations from this. The fragile stability of the system is confirmed by the impulse response functions examination where the exchange rate of the GRD do not converge to its long-run values, even after a 3 years period from the one unit-shock in various innovations. The determinant role of the growth rate of the unit labour cost and therefore of European countries’ prices to the exchange rate of GRD, to the Hellenic inflation rate, and less to the growth rate of the import prices is (1) justified by its high proportion to their variance decomposition and (2) became apparent approximately after 9 months. The latter seems to amount to the “contract-period” in the Magee’s terminology.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series International Finance with number 0505013.
Length: 14 pages
Date of creation: 20 May 2005
Date of revision:
Note: Type of Document - pdf; pages: 14. The paper is published from the 'European Research Studies Journal', in 2000, vol. III, Iss.(1-2), pp.105-121.
Contact details of provider:
Web page: http://126.96.36.199
Trade Balance Adjustment through exchange rate policies; European Monetary Integration; Unit Root Tests; Co-integration Analysis; Innovation Accounting;
Find related papers by JEL classification:
- F3 - International Economics - - International Finance
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-05-23 (All new papers)
- NEP-HIS-2005-05-23 (Business, Economic & Financial History)
- NEP-IFN-2005-05-23 (International Finance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Phillips, Peter C B & Ouliaris, S, 1990.
"Asymptotic Properties of Residual Based Tests for Cointegration,"
Econometric Society, vol. 58(1), pages 165-93, January.
- Tom Doan, . "POTESTRESIDS: RATS procedure to perform Phillips-Ouliaris-Hansen test for Cointegration on 1st stage residuals," Statistical Software Components RTS00248, Boston College Department of Economics.
- Peter C.B. Phillips & Sam Ouliaris, 1987. "Asymptotic Properties of Residual Based Tests for Cointegration," Cowles Foundation Discussion Papers 847R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1988.
- Tom Doan, . "POTEST: RATS procedure to perform Phillips-Ouliaris-Hansen test for Cointegration," Statistical Software Components RTS00247, Boston College Department of Economics.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Richard Herd, 1987. "Import and Export Price Equations for Manufactures," OECD Economics Department Working Papers 43, OECD Publishing.
- Brissimis, Sophocles N. & Leventakis, John A., 1989. "The effectiveness of devaluation: A general equilibrium assessment with reference to Greece," Journal of Policy Modeling, Elsevier, vol. 11(2), pages 247-271.
- Dolado, Juan José & Jenkinson, Tim & Sosvilla-Rivero, Simón, 1990.
"Cointegration and Unit Roots,"
Open Access publications from Universidad Carlos III de Madrid
info:hdl:10016/3321, Universidad Carlos III de Madrid.
- Bennett T. McCallum, 1993.
"Unit Roots in Macroeconomic Time Series: Some Critical Issues,"
NBER Working Papers
4368, National Bureau of Economic Research, Inc.
- Bennett T. McCallum, 1993. "Unit roots in macroeconomic time series: some critical issues," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 13-44.
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Irving B. Kravis & Robert E. Lipsey, 1977. "Export and Domestic Prices Under Inflation and Exchange Rate Movements," NBER Working Papers 0176, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.