EconPapers    
Economics at your fingertips  
 

A CVAR scenario for a standard monetary model using theory-consistent expectations

Katarina Juselius

No 17-08, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: A theory-consistent CVAR scenario describes a set of testable regularities capturing basic assumptions of the theoretical model. Using this concept, the paper considers a standard model for exchange rate determination and shows that all assumptions about the model?s shock structure and steady-state behavior can be formulated as testable hypotheses on common stochastic trends and cointegration. While the scenario was rejected on essentially all counts, the results were informative about the cause of the empirical failure. It was the stationarity assumptions that were too restrictive to explain the long persistent swings in the real exchange rate and the interest rate differential.

Keywords: Theory-Consistent CVAR; Expectations; International Puzzles; Long Swings; Persistence; Imperfect Knowledge (search for similar items in EconPapers)
JEL-codes: F31 F41 G15 G17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mon and nep-opm
Date: 2017-04-10
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.econ.ku.dk/english/research/publications/wp/dp_2017/1708.pdf (application/pdf)

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:kud:kuiedp:1708

Access Statistics for this paper

More papers in Discussion Papers from University of Copenhagen. Department of Economics Øster Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Hoffmann ().

 
Page updated 2019-10-17
Handle: RePEc:kud:kuiedp:1708