The Monetary Model Strikes Back: Evidence from the World

Valerie Cerra and Sweta Saxena

No 2008/073, IMF Working Papers from International Monetary Fund

Abstract: We revisit the dramatic failure of monetary models in explaining exchange rate movements. Using the information content from 98 countries, we find strong evidence for cointegration between nominal exchange rates and monetary fundamentals. We also find fundamentalsbased models very successful in beating a random walk in out-of-sample prediction.

Keywords: WP; common time; null hypothesis (search for similar items in EconPapers)
Pages: 41
Date: 2008-03-01
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Citations: View citations in EconPapers (10)

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Journal Article: The monetary model strikes back: Evidence from the world (2010)
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