Off the Mark: Lessons for Exchange Rate Modelling
Many explanations have been advanced for the apparent breakdown of monetary exchange-rate model s in the late 1970s. This paper shows that the initial empirical supp ort enjoyed by the models was an illusion created by the failure to a ccount for exchange-rate nonstationarity and the arbitrary imposition of dynamic restrictions. Furthermore, estimation of a more general, dynamic specification and cointegration tests both lead to rejection of a central proposition of the monetary approach, the long-run propo rtionality of the exchange rate to relative money supplies. Copyright 1987 by Royal Economic Society.
Volume (Year): 39 (1987)
Issue (Month): 3 (September)
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