Identifying Linear Restrictions on the Monetary Exchange Rate Model and the Uncovered Interest Parity: Cointegration Evidence from the Canadian-U.S. Dollar

Κουρέτας, Γεώργιος Π.

doi:10.2307/136275

Cited by 22 publications

(23 citation statements)

References 18 publications

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“…The Kouretas (1997) results therefore show no support for the monetary exchange rate model as a long-run phenomenon. With the four and one-half additional years of data available to me, however, the long-run exchange rate relationship could finally appear.…”

Section: Introductionmentioning

confidence: 70%

“…Furthermore, in no case are the signs for the home and foreign money supplies reversed. As in Kouretas (1997), I use the monthly end-of-period exchange rate, money supplies, industrial productions, and three-month Treasury bill rates from the International Financial Statistics CD-ROM disk. Canada is treated as the home country.…”

Section: The Monetary Exchange Rate Model and Datamentioning

confidence: 99%

“…In Kouretas's (1997) results, the reported trace test value of 169.2 with the unrestricted constant should be adjusted downward using the degree-of-freedom correction to 117.6 if it is to be compared with asymptotic critical values. 3 According to DisCo, the relevant asymptotic 0.05 critical value is 128.20 instead of 124.24, as used by Kouretas (1997), and so the result is not significant at the 0.05 level. The p-value is 0.18.…”

Section: Introductionmentioning

confidence: 99%

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The failure of the monetary exchange rate model for the Canadian‐U.S. dollar

Cushman¹

2000

Canadian J of Economics

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In this paper the validity of the monetary exchange rate model in the long run for the Canadian-U.S. dollar exchange rate is examined. The primary test employed is the Johansen (1991) and Johansen and Juselius (1990) cointegration technique. The effects of dummy variables and lag specification on the statistical inference are considered, and Monte Carlo simulations based on the estimated parameters are employed. Despite the use of the longest data set yet for the Canadian case, no evidence is found in favour of the monetary exchange rate model using the Johansen procedures. This result is confirmed by several other cointegration procedures. JEL Classification: F31; F41 La faillite du modèle monétaire du taux de change pour les dollars canadien et américain. Ce mémoire examine le modèle monétaire du taux de change pour savoir s'il est validé par l'expérience canado-américaine en longue période. Le test principal utilisé est la technique de cointégration de Johansen (1991) et Johansen et Juselius (1990). Les effets des variables fictives et de la spécification de la structure de délais sur l'inférence statistique sont considérés, et on utilise des simulations de Monte Carlo fondées sur les paramètres calibrés. Malgré le fait qu'on fait appel à la plus longue série chronologique utilisée dans ce type d'analyse à ce jour, on ne trouve aucun support du modèle monétaire du taux de change en utilisant les procédures de Johansen. Ce résultat est confirmé par l'utilisation de plusieurs autres procédures de cointégration.

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Section: Introductionmentioning

confidence: 70%

Section: The Monetary Exchange Rate Model and Datamentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The failure of the monetary exchange rate model for the Canadian‐U.S. dollar

Cushman¹

2000

Canadian J of Economics

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“…However, later studies by Rasulo and Wilford (1980); Haynes and Stone (1981) and Driskill and Sheffrin (1981) employing data beyond 1978 have led to results, which are unsupportive of the theory. Nevertheless, by employing cointegration techniques, studies by MacDonald and Taylor (1991Taylor ( , 1993Taylor ( , 1994a; Diamandis and Kouretas (1996); Kouretas (1997); Reinton and Ongena (1999); Hwang (2001) and Tawadros (2001) have found evidence for the long-run validity of the model as well as its outof-sample forecasting performance. Most recently, Husted and MacDonald (1999) and Groen (2000) tested the model using panel cointegration tests for the post-Bretton Woods float and they reported strong evidence in favour of the monetary approach.…”

Section: Introductionmentioning

confidence: 99%

Tests of different monetary aggregates for the monetary models of the exchange rate in five ASEAN countries

2009

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This study examines the usefulness of divisia money, relative to simple sum money, for exchange rate modelling in a period of rapid financial deregulation. This comparison is conducted using the monetary model of the exchange rate. In the long-run modelling, the divisia money is significantly superior to simple sum money in the case of Malaysia and the Philippines while indifferent for Indonesia, Singapore and Thailand.

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“…MacDonald and Taylor (1991, 1993, 1994a, 1994b, Kouretas (1997), D iam andis, Georgoutos and Kouretas (1998), Makrydakis (1998), Husted and MacDonald (1998), Reinton and Ongena (1999), Chinn (1999Chinn ( , 2000, Miyakoshi (2000), Hwang (2001), Tawadros (2001), Civcir (2003), Sarno, Valente, and Wohar (2004), Lee, Azali and Matthews (2007), Bitzenis and Marangos (2007), and others have found evidence in support of the m onetary m odels for som e currencies. To m easure the potential im pact of the productivity differential in the tradable and non-tradable sectors on the nom inal exchange rate, the Balassa-Sam uelson effect (Balassa, 1964;Sam uelson, 1964;Chinn, 1999Chinn, , 2000D rine and Rault, 2005;CrespoCuaresm a, Fidrm uc, and MacDonald, 2005;Lothian and Taylor, 2006) will be tested.…”

Section: Introductionmentioning

confidence: 96%

Application of Monetary Models of Exchange Rate Determination for Poland

Hsing¹

2008

South East European Journal of Economics and Business

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Abstract:T he zloty/U SD exchange rate is examined based on the D ornbusch model, the B ilson model, the F renkel model, and the F rankel model. E mpirical results show that the coefficient of the relative money supply is positive and significant, that the coefficient of the relative output is negative and significant, and that the B ilson model or the F renkel model applies to P oland. H ence, the nominal exchange rate is positively affected by the relative interest rate and the relative expected inflation rate. T he B alassa-Samuelson effect is confirmed in both models. T he B ilson model has a smaller root mean squared error or mean absolute percent error than the F renkel model.

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Identifying Linear Restrictions on the Monetary Exchange Rate Model and the Uncovered Interest Parity: Cointegration Evidence from the Canadian-U.S. Dollar

Cited by 22 publications

References 18 publications

The failure of the monetary exchange rate model for the Canadian‐U.S. dollar

The failure of the monetary exchange rate model for the Canadian‐U.S. dollar

Tests of different monetary aggregates for the monetary models of the exchange rate in five ASEAN countries

Application of Monetary Models of Exchange Rate Determination for Poland

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