Testing the canonical model of exchange rates with unobservable fundamentals

• 成果类型: Article
• 署名作者: Gardeazabal, J; Regulez, A; Vazquez, J
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.2307/2527380
• 发表日期: 1997
• 页码: 389-404
• 关键词: rate dynamics; monetary approach; target zones; volatility

摘要

In this paper we test the asset market approach or canonical model of exchange rates. We 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. We also find evidence of feedback from the exchange rate to fundamentals, which is normally omitted in the theoretical literature.