The Monetary Model of Exchange Rate: Evidence from the Philippines Using ARDL Approach
In this paper, we re-examine the validity of both short and long run monetary models of exchange rate for the case of the Philippines by using new approach called Autoregressive Distributed Lag (ARDL) to cointegration. From our analysis, some findings are obtained. First, there are robust short and long run relationships between variables in the monetary exchange rate model. Second, the stability of the estimated parameters is confirmed by CUSUM and CUMSUQ stability tests. Third, the Purchasing Power Parity (PPP) condition is not hold for the Philippines. Last, all the monetary restrictions are rejected. Therefore, this result seems to suggest that the estimation result of the monetary model of exchange rate, in which monetary restrictions are assumed to be satisfied beforehand, might suffer from a number of deficiency; it is not appropriate to estimate the exchange rate model before the monetary restrictions are confirmed as also mentioned in Haynes and Stone (1981).
|Date of creation:||Jun 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chinn, Menzie D., 2000.
"Before the fall: were East Asian currencies overvalued?,"
Emerging Markets Review,
Elsevier, vol. 1(2), pages 101-126, September.
- Menzie D. Chinn, 1998. "Before the Fall: Were East Asian Currencies Overvalued?," NBER Working Papers 6491, National Bureau of Economic Research, Inc.
- Dollar Case, 1998. "Testing the long-run validity of the monetary approach to the exchange rate: the won-US," Applied Economics Letters, Taylor & Francis Journals, vol. 5(8), pages 507-511.
- Tatsuyoshi Miyakoshi, 2000. "The monetary approach to the exchange rate: empirical observations from Korea," Applied Economics Letters, Taylor & Francis Journals, vol. 7(12), pages 791-794.
- Arulampalam, W. & Robin A. Naylor & Jeremy P. Smith, 2002. "University of Warwick," Royal Economic Society Annual Conference 2002 9, Royal Economic Society.
- George Tawadros, 2001. "The predictive power of the monetary model of exchange rate determination," Applied Financial Economics, Taylor & Francis Journals, vol. 11(3), pages 279-286.
- Lee Chin & M. Azali & Zulkornain Yusop & Mohammed Yusoff, 2007. "The monetary model of exchange rate: evidence from The Philippines," Applied Economics Letters, Taylor & Francis Journals, vol. 14(13), pages 993-997.
- Husted, Steven & MacDonald, Ronald, 1999. "The Asian currency crash: were badly driven fundamentals to blame?," Journal of Asian Economics, Elsevier, vol. 10(4), pages 537-550.
- Paresh Kumar Narayan, 2008. "Revisiting the US money demand function: an application of the Lagrange multiplier structural break unit root test and the bounds test for a long-run relationship," Applied Economics, Taylor & Francis Journals, vol. 40(7), pages 897-904.
- Mohsen Bahmani-Oskooee & Hafez Rehman, 2005. "Stability of the money demand function in Asian developing countries," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 773-792.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:9822. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.