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2015-09

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Si us plau utilitzeu sempre aquest identificador per citar o enllaçar aquest document: https://hdl.handle.net/2445/106986

The failure of the monetary model of exchange rate determination

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Recurs relacionat

https://doi.org/10.1080/00036846.2015.1031878

Resum

In this paper, we test three popular versions of the monetary model (flexible price, forward-looking and real interest differential models) for the OECD member countries by applying Johansen cointegration technique. Based on country-by-country analysis, we conclude that monetary models do not provide the expected results. We reveal several shortcomings of the models and examine the building blocks of the fundamental version. Although researchers always blame the deviations from purchasing power parity as the reason for the failure of the monetary model, our analysis indicates that invalidity of Keynesian money demand function is also responsible for unfavourable results.

Matèries

Canvi, Canvi exterior, Política de preus, Poder adquisitiu

Matèries (anglès)

Exchange, Foreign exchange, Prices policy, Purchasing power

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Articles publicats en revistes (Economia)

Citació

AFAT, Dinçer, GÓMEZ-PUIG, Marta and SOSVILLA RIVERO, Simón. The failure of the monetary model of exchange rate determination. Applied Economics. 2015. Vol. 47, num. 43, pags. 4607-4629. ISSN 0003-6846. [consulted: 25 of May of 2026]. Available at: https://hdl.handle.net/2445/106986

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