It has been twenty years since Frankel (1979) offered the classic empirical support for the Dornbusch (1976) overshooting model against the simple monetary approach model, and almost that long since Driskill and Sheffrin (1981) uncovered some important inconsistencies between Frankel’s theoretical framework and his empirical implementation. Frankel’s RID model nevertheless spawned a huge lit-erature in international monetary economics. In this paper, we replicate and update the Frankel (1979) and Driskill and Sheffrin (1981) results, in order to offer a retrospective and a reëvaluation of this lit-erature. We also explain why the model estimated by Driskill and Sheffrin (1981) cannot underpin a critique of Frankel (1979), a point which is not generally recognized. While specialists in international finance generally recognize that the initial promise of Frankel’s research has not been kept, we believe that many will be surprised nevertheless by our stark findings. JEL: F31, F40, C13
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Length: 27 pages Date of creation: 29 Jul 1999 Date of revision: Handle: RePEc:wpa:wuwpif:9907002
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Find related papers by JEL classification: F31 - International Economics - - International Finance - - - Foreign Exchange F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
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