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A panel cointegration approach to the estimation of the peseta real exchange rate

  • Mariam Camarero

    (Jaume I University and FUNCAS)

  • Cecilio Tamarit

    (University of Valencia and FUNCAS)

In this paper we estimate different specifications of a model for the determination of the bilateral real exchange rate of the peseta relative to nine European Union members. The model is based on Meese and Rogo (1988) monetary approach as extended by MacDonald (1998). The applied econometric techniques are the recent panel cointegration tests developed by Kao (1999), McCoskey and Kao (1998) and Pedroni (1999) for homogeneous and heterogeneous panels. The results are favorable to a model containing relative productivities in tradables and non-tradables and the real interest rate di¤erentials as explanatory variables.

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Paper provided by Asociación Española de Economía y Finanzas Internacionales in its series Working Papers with number 01-08.

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Length: 38 pages
Date of creation: Nov 2001
Date of revision:
Handle: RePEc:aee:wpaper:0108
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  1. Suzanne McCoskey & Chihwa Kao, 1999. "A Monte Carlo Comparison of Tests for Cointegration in Panel Data," Center for Policy Research Working Papers 3, Center for Policy Research, Maxwell School, Syracuse University.
  2. Menzie Chinn & Louis Johnston, 1996. "Real Exchange Rate Levels, Productivity and Demand Shocks: Evidence from a Panel of 14 Countries," NBER Working Papers 5709, National Bureau of Economic Research, Inc.
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  11. Anthony, Myrvin & MacDonald, Ronald, 1998. "On the mean-reverting properties of target zone exchange rates: Some evidence from the ERM," European Economic Review, Elsevier, vol. 42(8), pages 1493-1523, September.
  12. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I.
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  16. Robert A. Amano & Simon van Norden, 1995. "Oil Prices and the Rise and Fall of the U.S. Real Exchange Rate," International Finance 9502001, EconWPA.
  17. Stephen Cecchetti & Nelson C. Mark & Robert Sonora, 1998. "Price Level Convergence Among United States Cities: Lessons for the European Central Bank," Working Papers 32, Oesterreichische Nationalbank (Austrian Central Bank).
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  23. Ronald MacDonald & Jun Nagayasu, 2000. "The Long-Run Relationship Between Real Exchange Rates and Real Interest Rate Differentials: A Panel Study," IMF Staff Papers, Palgrave Macmillan, vol. 47(1), pages 5.
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  25. Maurice Obstfeld., 1993. "Model Trending Real Exchange Rates," Center for International and Development Economics Research (CIDER) Working Papers C93-011, University of California at Berkeley.
  26. Meese, R. & Rogoff, K., 1988. "Was It Real? The Exchange Rate-Interest Differential Ralation Over The Modern Floating-Rate Period," Working papers 368, Wisconsin Madison - Social Systems.
  27. Baxter, Marianne, 1994. "Real exchange rates and real interest differentials: Have we missed the business-cycle relationship?," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 5-37, February.
  28. Chinn, Menzie David, 1997. "Paper pushers or paper money? Empirical assessment of fiscal and monetary models of exchange rate determination," Journal of Policy Modeling, Elsevier, vol. 19(1), pages 51-78, February.
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