The failure of the monetary exchange rate model for the Canadian-U.S. dollar

In this paper the validity of the monetary exchange rate model in the long run for the Canadian-U.S. dollar exchange rate is examined. The primary test employed is the Johansen (1991) and Johansen and Juselius (1990) cointegration technique. The effects of dummy variables and lag specification on th...

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Bibliographic Details
Published in:The Canadian journal of economics 2000-08, Vol.33 (3), p.591-603
Main Author: Cushman, David O.
Format: Article
Language:English
Subjects:
Canada
Coefficients
Critical values
Currencies
Dollar
Economic models
Economic theory
Estimating techniques
Exchange rates
Floating exchange rates
Foreign exchange rates
Hypotheses
Mathematical vectors
Modeling
Modelling
Money supply
Monte Carlo simulation
P values
Statistical analysis
Statistics
Studies
U.S.A
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Summary:In this paper the validity of the monetary exchange rate model in the long run for the Canadian-U.S. dollar exchange rate is examined. The primary test employed is the Johansen (1991) and Johansen and Juselius (1990) cointegration technique. The effects of dummy variables and lag specification on the statistical inference are considered, and Monte Carlo simulations based on the estimated parameters are employed. Despite the use of the longest data set yet for the Canadian case, no evidence is found in favour of the monetary exchange rate model using the Johansen procedures. This result is confirmed by several other cointegration procedures. JEL Classification: F31; F14
ISSN:0008-4085
1540-5982
DOI:10.1111/0008-4085.00031