A Theory-Consistent CVAR Scenario for a Monetary Model with Forward-Looking Expectations

Autor:	Katarina Juselius
Jazyk:	angličtina
Rok vydání:	2022
Předmět:	theory-consistent CVAR expectations international puzzles long swings persistence imperfect knowledge Economics as a science HB71-74
Zdroj:	Econometrics, Vol 10, Iss 2, p 16 (2022)
Druh dokumentu:	article
ISSN:	2225-1146
DOI:	10.3390/econometrics10020016
Popis:	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 with forward-looking expectations 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. The basic stationarity assumptions of the monetary model failed to obtain empirical support. They were too restrictive to explain the observed long persistent swings in the real exchange rate, the real interest rates, and the inflation and interest rate differentials.
Databáze:	Directory of Open Access Journals
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