The Monetary Exchange Rate Model as a Long-Run Phenomenon

Jan Groen

No 98-082/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: 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.

Date: 1998-07-30
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Citations: View citations in EconPapers (5)

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Journal Article: The monetary exchange rate model as a long-run phenomenon (2000)
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