Cross-section dependence and the monetary exchange rate model - A panel analysis

North American Journal of Economics and Finance

Volumn 23, Issue 1, 2012, Pages 38-53

  Beckmann, Joscha ^a   Belke, Ansgar ^a,b,c   Dobnik, Frauke ^a,d  

^a UNIVERSITY OF DUISBURG ESSEN   (Germany)

^b DIW BERLIN   (Germany)

^c IZA   (Germany)

^d Ruhr Graduate School in Economics RGS Econ   (Germany)

Author keywords

Cointegration; Common factors; Error correction models; Monetary exchange rate model; Panel data

Indexed keywords

EID: 83755229541     PISSN: 10629408     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.najef.2011.11.003     Document Type: Article

References (55)

1. Abuaf N., Jorion P. Purchasing power parity in the long run. Journal of Finance 1990, 45:157-174.
2. Arellano M., Bond S. Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies 1991, 58:277-297.
3. Bai J., Ng S. A PANIC attack on unit roots and cointegration. Econometrica 2004, 72:1127-1177.
4. Banerjee A., Marcellino M., Osbat C. Some cautions on the use of panel methods for integrated series of macroeconomic data. Econometrics Journal 2004, 7:322-340.
5. Banerjee A., Marcellino M., Osbat C. Testing for PPP: Should we use panel methods?. Empirical Economics 2005, 30:77-91.
6. Basher S.A., Westerlund J. Panel cointegration and the monetary exchange rate model. Economic Modelling 2009, 26:506-513.
7. Breitung J., Pesaran M.H. Unit roots and cointegration in panels. The econometrics of panel data: Advanced studies in theoretical and applied econometrics 2008, Vol. 46:279-322. Springer. L. Matyas, P. Sevestre (Eds.).
8. Campbell J.Y., Perron P. Pitfalls and opportunities: What macroeconomists should know about unit roots. NBER macroeconomics annual 1991, Vol. 6:141-220. MIT Press, Cambridge. O.J. Blanchard, S. Fisher (Eds.).
9. Cerra V., Saxena S.C. The monetary model strikes back: Evidence from the world. Journal of International Economics 2010, 81:184-196.
10. Choi I. Unit root tests for panel data. Journal of International Money and Finance 2001, 20:249-272.
11. De Hoyos R.E., Sarafidis V. Testing for cross-sectional dependence in panel-data models. Stata Journal 2006, 6:482-496.
12. Dickey D.A., Fuller W.A. Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association 1979, 74:427-431.
13. Dreger C. Does the nominal exchange rate regime affect the real interest parity condition?. North American Journal of Economics and Finance 2010, 21:274-285.
14. Frankel J.A. On the mark: A theory of floating exchange rates based on real interest differentials. American Economic Review 1979, 69:610-622.
15. Frömmel M., MacDonald R., Menkhoff L. Do fundamentals matter for the d-mark/euro-dollar? A regime switching approach. Global Finance Journal 2005, 15:321-335.
16. Frömmel M., MacDonald R., Menkhoff L. Markov switching regimes in a monetary exchange rate model. Economic Modelling 2005, 22:485-502.
17. Gengenbach C., Palm F.C., Urbain J.-P. Cointegration testing in panels with common factors. Oxford Bulletin of Economics and Statistics 2006, 68(Suppl.):683-719.
18. Goldberg M.D., Frydman R. Macroeconomic fundamentals and the DM/$ exchange rate: Temporal instability and the monetary model. International Journal of Finance & Economics 2001, 6:421-435.
19. Granger C.W.J. Developments in the study of cointegrated economic variables. Oxford Bulletin of Economics and Statistics 1986, 48:213-228.
20. Groen J.J.J. Long horizon predictability of exchange rates: Is it for real?. Empirical Economics 1999, 24:451-469.
21. Groen J.J.J. Cointegration and the monetary exchange rate model revisited. Oxford Bulletin of Economics and Statistics 2002, 64:361-380.
22. Hakkio C.S. A re-examination of purchasing power parity: A multi-country and multi-period study. Journal of International Economics 1984, 17:265-277.
23. Harris R.I.D., Sollis R. Applied time series modelling and forecasting 2003, J. Wiley, Chichester.
24. Haug A.A., MacKinnon J.G., Michelis L. European monetary union: A cointegration analysis. Journal of International Money and Finance 2000, 19:419-432.
25. Husted S., MacDonald R. Monetary-based models of the exchange rate: A panel perspective. Journal of International Financial Markets, Institutions and Money 1998, 8:1-19.
26. Johansen S. Likelihood-based inference in cointegrated vector autoregressive models 1995, Oxford University Press, Oxford.
27. Juselius K. The Cointegrated VAR model: Methodology and applications 2007, Oxford University Press., New York. 2nd ed.
28. Kühl, M. (2008). Strong comovements of exchange rates: Theoretical and empirical cases when currencies become the same asset. CEGE - Center for European, Governance and Economic Development Research Discussion Paper No. 76.
29. Kühl M. Bivariate cointegration of major exchange rates, cross-market efficiency and the introduction of the euro. Journal of Economics and Business 2010, 62:1-19.
30. Levin A., Lin C., Chu C.J. Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics 2002, 108:1-24.
31. MacKinnon J.G. Numerical distribution functions for unit root and cointegration tests. Journal of Applied Econometrics 1996, 11:601-618.
32. MacKinnon J.G., Haug A.A., Michelis L. Numerical distribution functions of likelihood ratio tests for cointegration. Journal of Applied Econometrics 1999, 14:563-577.
33. Maddala G.S., Wu S. A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and Statistics 1999, 61:631-652.
34. Mark N.C., Sul D. Nominal exchange rates and monetary fundamentals: Evidence from a small post-Bretton Woods panel. Journal of International Economics 2001, 53:29-52.
35. Mark N.C., Sul D. Cointegration vector estimation by panel DOLS and long-run money demand. Oxford Bulletin of Economics and Statistics 2003, 65:655-680.
36. McMillan D.G. Smooth-transition error-correction in exchange rates. The North American Journal of Economics and Finance 2005, 16:217-232.
37. Meese R.A., Rogoff K. Empirical exchange rate models of the seventies: Do they fit out of sample?. Journal of International Economics 1983, 14:3-24.
38. Ng S., Perron P. Lag length selection and the construction of unit root tests with good size and power. Econometrica 2001, 69:1519-1554.
39. Nickell S.J. Biases in dynamic models with fixed effects. Applied Economics 1981, 49:1417-1426.
40. Pedroni P. Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics 1999, 61:653-670.
41. Pedroni P. Panel cointegration, asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric Theory 2004, 20:597-625.
42. Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels. CESifo Working No. 1229.
43. Phengpis C., Nguyen V. Policy coordination and risk premium in foreign exchange markets for major EU currencies. Journal of International Financial Markets, Institutions and Money 2009, 19:47-62.
44. Phillips P.C.B., Perron P. Testing for a unit root in time series regression. Biometrika 1988, 75:335-346.
45. Rapach D.E., Wohar M.E. Testing the monetary model of exchange rate determination: A closer look at panels. Journal of International Money and Finance 2004, 23:867-895.
46. Reimers H. Comparisons of tests for multivariate cointegration. Statistical Papers 1992, 33:335-359.
47. Reinsel G.C., Ahn S.K. Vector autoregressive models with unit roots and reduced rank structure: Estimation, likelihood ratio test, and forecasting. Journal of Time Series Analysis 1992, 13:353-375.
48. Sarno L., Taylor M.P. The economics of exchange rates 2003, Cambridge University Press, Cambridge.
49. Taylor M.P., Peel D.A. Nonlinear adjustment, long-run equilibrium and exchange rate fundamentals. Journal of International Money and Finance 2000, 19:33-53.
50. Taylor M.P., Peel D.A., Sarno L. Nonlinear mean-reversion in real exchange rates: Toward a solution to the purchasing power parity puzzles. International Economic Review 2001, 42:1015-1042.
51. Urbain, J., & Westerlund, J. (2006). Spurious regression in nonstationary panels with Cross-Unit cointegration. METEOR Research Memoranda No. 057.
52. Wagner H. Which exchange rate regimes in an era of high capital mobility?. The North American Journal of Economics and Finance 2000, 11:191-203.
53. Wagner M., Hlouskova J. The performance of panel cointegration methods: Results from a large scale simulation study. Econometric Reviews 2010, 29:182-223.
54. Wu Y. Are real exchange rates nonstationary? Evidence from a panel-data test. Journal of Money, Credit and Banking 1996, 28:54-63.
55. Yuan C. The exchange rate and macroeconomic determinants: Time-varying transitional dynamics. The North American Journal of Economics and Finance 2011, 22:197-220.