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Long-run and Short-run Effects of Exchange Rate Movements for Major EU Countries: Cointegration and Error- Correction Modeling

Author

Listed:
  • Cantavella-Jordá, Manuel

    (Universitat Jaume I and Instituto de Economía Internacional)

  • Suárez-Burguet, Celestino

    (Universitat Jaume I and Instituto de Economía Internacional)

Abstract

This paper examines the long-run and short- run effects of depreciation/ devaluation for major European Union countries (Germany, France, the Unit - ed Kingdom, and Italy) over the 1975-1997 period. The approach is based on cointegration techniques proposed by Johansen [1988] and uses quarterly data. The empirical results indicate the existence of a positive relationship between the exchange rate and the trade balance for each country although long-run effects are rather moderate. According to the short- run analysis, there is a find - ing of a J-curve for Italy and the United Kingdom. The costs of relinquishing individual exchange rates may be rather small for major EU countries.

Suggested Citation

  • Cantavella-Jordá, Manuel & Suárez-Burguet, Celestino, 1998. "Long-run and Short-run Effects of Exchange Rate Movements for Major EU Countries: Cointegration and Error- Correction Modeling," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 13, pages 606-625.
    • Handle: RePEc:ris:integr:0090
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    More about this item

    Keywords

    Long-run Effects; Short-run Effects; Exchange Rate Movements;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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