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Long-Run Exchange Rate Modeling: A Survey of the Recent Evidence
Author:
Mr. Ronald MacDonald null

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Series:
IMF Working Papers
Volume/Issue:
Volume 1995: Issue 014
Language:
English
Publication Date:
01 Jan 1995
DOI:
https://doi.org/10.5089/9781451843064.001
ISBN:
9781451843064
ISSN:
1018-5941
Pages:
52
Keywords:
WP; U.S. dollar; balance of payments; current account; mean reversion; pound sterling; time series; regression equation; further evidence; price combination; Real exchange rates; Exchange rates; Purchasing power parity; Currencies; Consumer price indexes
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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In this paper we survey the recent literature on long run, or equilibrium, exchange rate modeling. In particular, we review the voluminous literature which tests for a unit root in real exchange rates and the closely related work on testing for a unit root in the residual from a regression of the nominal exchange rate on relative prices. We argue that the balance of evidence is supportive of the existence of some form of long-run exchange rate relationship. The form of this relationship, however, does not accord exactly with a traditional representation of the long-run exchange rate. We offer some potential explanations for this lack of conformity.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund