MacDonald, R. and Taylor, M. P. (1994) The monetary model of the exchange rate: long-run relationships, short-run dynamics and how to beat a random walk. Journal of International Money and Finance, 13(3), pp. 276-290. (doi: 10.1016/0261-5606(94)90029-9)
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Abstract
The monetary model is re-examined for the sterling—dollar exchange rate. First, it is demonstrated, using a multivariate cointegration technique, that an unrestricted monetary model is a valid framework for analyzing the long-run exchange rate. Second, we find, once proper account has been taken of the short-run data dynamics, that an unrestricted monetary model outperforms the random walk and other models in an out-of-sample forecasting contest.
| Item Type: | Articles |
|---|---|
| Status: | Published |
| Refereed: | Yes |
| Glasgow Author(s) Enlighten ID: | MacDonald, Professor Ronald |
| Authors: | MacDonald, R., and Taylor, M. P. |
| College/School: | College of Social Sciences > Adam Smith Business School > Economics |
| Journal Name: | Journal of International Money and Finance |
| Publisher: | Elsevier Ltd. |
| ISSN: | 0261-5606 |
| ISSN (Online): | 1873-0639 |
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