Panel cointegration and the monetary exchange rate model

Syed A. Basher, Joakim Westerlund

Research output: Contribution to journalArticlepeer-review


This paper re-examines the validity of the monetary exchange rate model during the post-Bretton Woods era for 18 OECD countries. Our analysis simultaneously considers the presence of both cross-sectional dependence and multiple structural breaks, which have not received much attention in previous studies of the monetary model. The empirical results indicate that the monetary model emerges only when the presence of structural breaks and cross-country dependence has been taken into account. Evidence is also provided suggesting that the breaks in the monetary model can be derived from the underlying purchasing power parity relation. (C) 2008 Elsevier B.V. All rights reserved.
Original languageEnglish
Pages (from-to)506-513
JournalEconomic Modelling
Issue number2
Publication statusPublished - 2009

Subject classification (UKÄ)

  • Economics

Free keywords

  • Structural break
  • cointegration
  • Panel
  • Monetary exchange rate model
  • Purchasing power parity
  • Cross-section dependence


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