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The monetary exchange rate model as a long-run phenomenon

  • Groen, Jan J. J.

Pure time series-based tests fail to find empirical support formonetary exchange rate models. In this paper we apply pooled timeseries estimation on a forward-looking monetary model, resulting inparameter estimates which are in compliance with the underlyingtheory. Based on a panel version of the Engle and Granger (1987) two-stepprocedure we find that the residuals of our pooled estimated modelare stationary. This indicates that on a pooled time series levelthere is cointegration between the exchange rate and themacroeconomic fundamentals of this monetary model.

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

Volume (Year): 52 (2000)
Issue (Month): 2 (December)
Pages: 299-319

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Handle: RePEc:eee:inecon:v:52:y:2000:i:2:p:299-319
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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