The Monetary Model of Exchange Rate: Evidence from the Philippines Using ARDL Approach

Dara Long () and Sovannroeun Samreth

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we re-examine the validity of both short and long run monetary models of exchange rate for the case of the Philippines by using new approach called Autoregressive Distributed Lag (ARDL) to cointegration. From our analysis, some findings are obtained. First, there are robust short and long run relationships between variables in the monetary exchange rate model. Second, the stability of the estimated parameters is confirmed by CUSUM and CUMSUQ stability tests. Third, the Purchasing Power Parity (PPP) condition is not hold for the Philippines. Last, all the monetary restrictions are rejected. Therefore, this result seems to suggest that the estimation result of the monetary model of exchange rate, in which monetary restrictions are assumed to be satisfied beforehand, might suffer from a number of deficiency; it is not appropriate to estimate the exchange rate model before the monetary restrictions are confirmed as also mentioned in Haynes and Stone (1981).

Keywords: Exchange rate model; ARDL approach to cointegration (search for similar items in EconPapers)
JEL-codes: F31 F33 (search for similar items in EconPapers)
Date: 2008-06
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Journal Article: The Monetary Model of Exchange Rate: Evidence from the Philippines Using ARDL Approach (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:9822

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