Testing the Canonical Model of Exchange Rates with Unobservable Fundamentals

Javier Gardeazabal, Marta Regulez and Jesús Vázquez

International Economic Review, 1997, vol. 38, issue 2, 389-404

Abstract: In this paper, the authors test the asset market approach or canonical model of exchange rates. They treat exchange rate fundamentals as unobservable. The empirical results do not reject the canonical model and, therefore, the embedded rational expectations assumption, in sharp contrast with previous empirical evidence. The authors also find evidence of feedback from the exchange rate to fundamentals, which is normally omitted in the theoretical literature. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1997
References: Add references at CitEc
Citations: View citations in EconPapers (8)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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:ier:iecrev:v:38:y:1997:i:2:p:389-404

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0020-6598

Access Statistics for this article

International Economic Review is currently edited by Harold L. Cole

More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and ().