Journal article
Tests of Exogeneity and Causality Specification in Monetary Models of Exchange Rate Determination
Atlantic economic journal, v 12(2), pp 54-60
01 Jul 1984
Abstract
The so-called monetary approach to the determination of exchange rates centers on the supply and demand for national monies. The joint exogeneity assumption of the explanatory variables implicit in monetary models of exchange-rate determination is tested. A general-vector autoregressive formulation of a hypothetical model implicit in these monetary models is presented, followed by test results for Canada, the UK, and Germany, using monthly data for the period January 1974-September 1979. The test results favor the exogeneity supposition, but the case of Canada arises from the dangers of inferring exogeneity by employing a bivariate test procedure. The general vector autoregressive estimation of the pertinent variables is also used to directly test the causality implication of the monetary models. The results support the monetary approach and suggest the existence of adjustment lags in exchange-rate markets.
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Details
- Title
- Tests of Exogeneity and Causality Specification in Monetary Models of Exchange Rate Determination
- Creators
- Yash Mehra - Drexel UniversityThomas Chiang - Drexel University
- Publication Details
- Atlantic economic journal, v 12(2), pp 54-60
- Publisher
- Springer Nature B.V
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- [Retired Faculty]
- Scopus ID
- 2-s2.0-34250135031
- Other Identifier
- 991019174899004721