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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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File URL: http://www.sciencedirect.com/science/article/pii/S0022-1996(87)80005-3
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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  17. Meese, Richard A, 1986. "Testing for Bubbles in Exchange Markets: A Case of Sparkling Rates?," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 345-73, April.
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