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Are exchange rates cointegrated with monetary model in panel data?
Author(s) -
Oh KeunYeob
Publication year - 1999
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/(sici)1099-1158(199904)4:2<147::aid-ijfe91>3.0.co;2-q
Subject(s) - economics , cointegration , float (project management) , exchange rate , econometrics , panel data , monetary economics , management
The question ‘Does the monetary model explain the exchange rate movement?’ is re‐examined. Using the simple monetary model, whether or not the exchange rates are cointegrated with the monetary model is tested. With data from seven countries during the recent float period, the panel approach gives favorable results for the monetary model. At the same time, there is no cointegration relationship from the bilateral approach. From the results that the panel methods provide, with a higher power of testing, it seems that some results from previous tests with bilateral rates may become invalid. Copyright © 1999 John Wiley & Sons, Ltd.