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Reexamining the monetary approach to the exchange rate : the dollar-franc, 1976—90
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MacDonald, Ronald and Taylor, Mark P. (1994) Reexamining the monetary approach to the exchange rate : the dollar-franc, 1976—90. Applied Financial Economics, 4 (6). pp. 423-430. doi:10.1080/758518674
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Official URL: http://dx.doi.org/10.1080/758518674
Abstract
Using data on the dollar-franc, we reexamine the monetary model of exchange-rate determination in two ways. First, we test its validity as a long-run exchange rate model, using multivariate cointegration techniques. Second, we examine and test the model in its short-run, forward-looking, rational-expectations formulation. We argue that previous tests of the short-run model may have been incorrectly implemented. Using a variant of the Campbell-Shiller technique for testing present-value models, we demonstrate that the static monetary equation has some long-run validity; that, assuming monetary exchange-rate fundamentals, the speculative-bubbles hypothesis is rejected; but that the forward-looking rational expectations restrictions are resoundingly also rejected.
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| Item Type: | Journal Article | ||||
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| Divisions: | Faculty of Social Sciences > Warwick Business School | ||||
| Journal or Publication Title: | Applied Financial Economics | ||||
| Publisher: | Routledge | ||||
| ISSN: | 0960-3107 | ||||
| Official Date: | 1994 | ||||
| Dates: |
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| Volume: | 4 | ||||
| Number: | 6 | ||||
| Page Range: | pp. 423-430 | ||||
| DOI: | 10.1080/758518674 | ||||
| Status: | Peer Reviewed | ||||
| Publication Status: | Published | ||||
| Access rights to Published version: | Restricted or Subscription Access |
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