Long-run and Short-run Effects of Exchange Rate Movements for Major EU Countries: Cointegration and Error- Correction Modeling

Manuel Cantavella-Jordá () and Celestino Suárez-Burguet
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Manuel Cantavella-Jordá: Universitat Jaume I and Instituto de Economía Internacional, Postal: Universitat Jaume I, Departamento de Economia, Campus Riu Sec,12080 Castellon, Spain
Celestino Suárez-Burguet: Universitat Jaume I and Instituto de Economía Internacional, Postal: Universitat Jaume I and Instituto de Economía Internacional

Journal of Economic Integration, 1998, vol. 13, 606-625

Abstract: This paper examines the long-run and short- run effects of depreciation/ devaluation for major European Union countries (Germany, France, the Unit - ed Kingdom, and Italy) over the 1975-1997 period. The approach is based on cointegration techniques proposed by Johansen [1988] and uses quarterly data. The empirical results indicate the existence of a positive relationship between the exchange rate and the trade balance for each country although long-run effects are rather moderate. According to the short- run analysis, there is a find - ing of a J-curve for Italy and the United Kingdom. The costs of relinquishing individual exchange rates may be rather small for major EU countries.

Keywords: Long-run Effects; Short-run Effects; Exchange Rate Movements (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0090

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