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

Sovannroeun Samreth and Dara Long ()
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Dara Long: Graduate School of Economics, Osaka University

Economics Bulletin, 2008, vol. 6, issue 31, 1-13

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).

JEL-codes: F3 G0 (search for similar items in EconPapers)
Date: 2008-08-04
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Citations: View citations in EconPapers (15)

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Working Paper: The Monetary Model of Exchange Rate: Evidence from the Philippines Using ARDL Approach (2008)
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