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Title: Tests of exogeneity for long-run PPP and uncovered interest parity in an identified model of the United Kingdom effective exchange rate
Authors: Hunter, J
Simpson, M
Keywords: Cointegration;Exogeneity;Fisher effect;Identification;Identifiability;Interest rate parity;Purchasing power parity
Issue Date: 1995
Publisher: Brunel University
Citation: Economics and Finance CERF Discussion Paper Series with number 95-07.
Abstract: This article presents results for a model of the UK effective exchange rate over the period 1973q3 to 1991q4. A key feature is the identification of long-run behaviour and the role of tests of exogeneity in this context. As a consequence of the identification process, the article tests for Purchasing Power Parity (PPP) and Interest Rate Parity (IRP) in the long-run, and defines a procedure for identifying long-run behaviour using an ordering based on the exogeneity status of variables. The order condition necessary for identification is augmented by conditions sufficient for global identification. The paper tests the over-identifying restrictions and for identifiability. The minimal set of cointegrating vectors includes a Fisher effect.
Description: Copyright @ 1995 Brunel University
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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