Publisher： Routledge Ltd
E-ISSN： 1466-4283|47|43|4607-4629
ISSN： 1466-4283
Source： Applied Economics, Vol.47, Iss.43, 2015-09, pp. : 4607-4629
Disclaimer: Any content in publications that violate the sovereignty, the constitution or regulations of the PRC is not accepted or approved by CNPIEC.
Abstract
In this article, 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.
Related content
Access to resources
Recommend
An empirical note on the monetary exchange rate model
Applied Economics Letters, Vol. 7, Iss. 10, 2000-10 ,pp. :
Testing the long-run structural validity of the monetary exchange rate model
Economics Letters, Vol. 75, Iss. 2, 2002-04 ,pp. :
The monetary model of the exchange rate under hyperinflation: New encouraging evidence
By Engsted T.
Economics Letters, Vol. 51, Iss. 1, 1996-04 ,pp. :