Using a Theory-Consistent CVAR Scenario to Test an Exchange Rate Model Based on Imperfect Knowledge

Katarina Juselius

Econometrics, 2017, vol. 5, issue 3, 1-20

Abstract: A theory-consistent CVAR scenario describes a set of testable regularieties one should expect to see in the data if the basic assumptions of the theoretical model are empirically valid. Using this method, the paper demonstrates that all basic assumptions about the shock structure and steady-state behavior of an an imperfect knowledge based model for exchange rate determination can be formulated as testable hypotheses on common stochastic trends and cointegration. This model obtaines remarkable support for almost every testable hypothesis and is able to adequately account for the long persistent swings in the real exchange rate.

Keywords: theory-consistent CVAR; imperfect Knowledge; theory-based expectations; international puzzles; long swings; persistence (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.mdpi.com/2225-1146/5/3/30/pdf (application/pdf)
https://www.mdpi.com/2225-1146/5/3/30/ (text/html)

Related works:
Working Paper: Using a Theory-Consistent CVAR Scenario to Test an Exchange Rate Model Based on Imperfect Knowledge (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jecnmx:v:5:y:2017:i:3:p:30-:d:104032

Access Statistics for this article

Econometrics is currently edited by Ms. Jasmine Liu

More articles in Econometrics from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().