The monetary model of exchange rate determination: the case of Greece (1974–1994)

Aristidis Bitzenis and John Marangos

International Journal of Monetary Economics and Finance, 2007, vol. 1, issue 1, 57-88

Abstract: The flexible-price monetary model is examined for the Greek drachma-US dollar exchange rate. The Johansen multivariate technique of co-integration is applied to an unrestricted form of the monetary model. Using quarterly data covering the period 1974–1994, strong evidence is found in favour of the existence of co-integration between the nominal exchange rate, relative money supply, relative income and relative interest rates. The monetary model is validated as a long-run equilibrium condition.

Keywords: Greece; monetary models; exchange rate determination; flexible prices; Greek drachma; co-integration; nominal exchange rate; relative money supply; relative income; relative interest rates. (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijmefi:v:1:y:2007:i:1:p:57-88

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