The Time Series Properties of the Real Exchange Rates Between the Member States of the European Monetary Union
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The Time Series Properties of the Real Exchange Rates Between the Member States of the European Monetary Union
Credit and Capital Markets – Kredit und Kapital, Vol. 52 (2019), Iss. 2 : pp. 149–171
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Prof. Dr. Rainer Maurer, Pforzheim University, Business School, Tiefenbronner Str. 65, 75175 Pforzheim, Phone.: +49-151-65114433
References
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Google Scholar -
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Google Scholar -
Breitung, J./Das, S. (2005): Panel unit root tests under cross-sectional dependence. Statistica Neerlandica 59: 414–433.
Google Scholar -
Busetti, F./Forni, L./Harvey, A./Venditti, F. (2007): Inflation convergence and divergence within the European Monetary Union, International Journal of Central Banking, 3 (2): 95–121.
Google Scholar -
Cumby, R. E./Huizinga, J. (1992): Testing the autocorrelation structure of disturbances in ordinary least squares and instrumental variables regressions. Econometrica, 60:1, 185–195.
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Google Scholar -
Herwartz, H./Maxand, S./Walle, Y. (2017): Heteroscedasticity-robust unit root testing for trending panels. Center for European, Governance and Economic Development Research Discussion Papers 314, University of Goettingen, Department of Economics. http://econpapers.repec.org/paper/zbwcegedp/314.htm.
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Google Scholar -
Issing, O. (2001): The Single Monetary Policy of the European Central Bank: One Size Fits All, International Finance, Volume 4, Issue 3 Winter 2001.
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Jarque, C. M./Bera, A. K. (1987): A test for normality of observations and regression residuals. International Statistical Review 2: 163–172.
Google Scholar -
Johansen, S. (1995): Likelihood-Based Inference in Cointegrated Vector Autoregressive Models. Oxford: Oxford University Press.
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Karanasos, M./Koutroumpis, P./Karavias, Y./Kartsaklas, A./Arakelian, V. (2016): Inflation convergence in the EMU, Journal of Empirical Finance, 39, issue PB, p. 241–253.
Google Scholar -
Kravis, I. B./Lipsey, R. E. (1991): The International Comparison Program: Current Status and Problems, in: Hooper, P. Richardson, J. D. (1991) International Economic Transactions: Issues in Measurement and Empirical Research, National Bureau of Economic Research (Book 55), University of Chicago Press.
Google Scholar -
Kwiatkowski, D./Phillips, P. C. B./Schmidt, P./Shin, Y. (1992): Testing the null hypothesis of stationarity against the alternative of a unit root: How sure are we that economic time series have a unit root? Journal of Econometrics, 54, 1992, 159–178.
Google Scholar -
Lee, T./Tse, Y. (1996): Cointegration tests with conditional heteroscedasticity, Journal of Econometrics, 73, issue 2, p. 401–410 Levin et al. (2002): Levin, A./Lin C.-F./C.-S. J. Chu. 2002. Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics 108: 1–24.
Google Scholar -
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Google Scholar -
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Google Scholar -
Miller, M./Sutherland, A. (1991): The ‘Walters Critique’ of the EMS: A Case of Inconsistent Expectations, The Manchester School Vol LIX Supplement June 1991, pp. 23–37.
Google Scholar -
OECD (2010): Main Economic Indicators – complete database, Main Economic Indicators (database):http://dx.doi.org/10.1787/data-00052-en.
Google Scholar -
Palley, T. (2000): Stabilizing Finance: The Case for Asset Based Reserve Requirements, Financial Markets and Society. The Financial Markets Center, Philmont.
Google Scholar -
Phillips, P. C. B./Perron, P. (1988): Testing for a unit root in time series regression. Biometrika 75: 335–346.
Google Scholar -
Schaffer, M. E. (2010): Stata Module to perform Engle-Granger Cointegration Tests and 2-step ECM estimation, http://ideas.repec.org/c/boc/bocode/s457210.html.
Google Scholar -
Silvapulle, P. S./Podivinsky, J. M. (2000): The effect of non-normal disturbances and conditional heteroscedasticity on multiple cointegration tests, Journal of Statistical Computation and Simulation, 65:1–4, 173–189.
Google Scholar -
Stock, J. H. (1987): Asymptotic properties of least squares estimators of cointegrating vectors, Econometrica 55, 277–302.
Google Scholar -
Svensson, L. E. O. (1999): Price Level Targeting vs. Inflation Targeting: A Free Lunch?, Journal of Money, Credit and Banking, Vol. 31 (1999): 277–295.
Google Scholar -
Westerlund, J. (2015): The effect of recursive detrending on panel unit root tests, Journal of Econometrics 185 (2): 453–467.
Google Scholar -
Akaike, H. (1974): “A new look at the statistical model identification,” in IEEE Transactions on Automatic Control, vol. 19, no. 6, pp. 716–723.
Google Scholar -
Alcidi, C./Belke, A./Giovanni, A./Gros, D. (2016): Macroeconomic Adjustment Programmes in the Euro Area: An Overall Assessment, International Economics and Economic Policy, Vol. 13/3, pp. 345–358.
Google Scholar -
Andrews, D./Zivot, E. (1992): Further evidence on the Great Crash, the oil price shock, and the unit-root hypothesis. Journal of Business and Economic Statistics 10, 251–70.
Google Scholar -
Banerjee, A./Marcellino, M./Osbat, C. (2005): Testing for PPP: Should we use panel methods? Empirical Economics 30: 77–91.
Google Scholar -
Baum, C. F./Schaffer, M. E. (2013): Stata module to perform Cumby-Huizinga general test for autocorrelation in time series, http://ideas.repec.org/c/boc/bocode/s457668.html.
Google Scholar -
Beckmann, J./Belke, A./Kuehl, M. (2011): The Stability of the Dollar–Euro Exchange Rate Determination Equation – A Time-varying Coefficient Approach, in: Review of World Economics, Vol. 147/1, 11–40.
Google Scholar -
Belke, A./Gros, D. (2017): Optimal Adjustment Paths in a Monetary Union, Economic Modelling, Vol. 67, 338–345.
Google Scholar -
Breitung, J. (2000): The local power of some unit root tests for panel data. In Advances in Econometrics, Volume 15: Nonstationary Panels, Panel Cointegration, and Dynamic Panels, ed. B. H. Baltagi, 161–178.
Google Scholar -
Breitung, J./Das, S. (2005): Panel unit root tests under cross-sectional dependence. Statistica Neerlandica 59: 414–433.
Google Scholar -
Busetti, F./Forni, L./Harvey, A./Venditti, F. (2007): In?ation convergence and divergence within the European Monetary Union, International Journal of Central Banking, 3 (2): 95–121.
Google Scholar -
Cumby, R. E./Huizinga, J. (1992): Testing the autocorrelation structure of disturbances in ordinary least squares and instrumental variables regressions. Econometrica, 60:1, 185–195.
Google Scholar -
Cheung, Y./Lai, K. S. (1993): Finite sample sizes of Johansen’s likelihood ratio tests for cointegration, Oxford Bulletin of Economics and Statistics 55, 313–328.
Google Scholar -
Corden, W. M./Neary, J. P. (1982): Booming Sector and De-Industrialisation in a Small Open Economy. The Economic Journal. 92, December, 1982: 825–48.
Google Scholar -
Davidson, R./MacKinnon, J. G. (2004): Econometric Theory and Methods. New York: Oxford University Press. p. 623.
Google Scholar -
Dickey, D. A./Fuller, W. A. (1979): Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association 74: 427–431.
Google Scholar -
Fraser Archive (1943): Banking and Monetary Statistics, 1914–1941, FRASER archive at the Federal Reserve Bank of St. Louis, https://fraser.stlouisfed.org/title/38.
Google Scholar -
FRED (2017): Federal Reserve Economic Data, Consumer Price Indices, https://fred.stlouisfed.org/categories/32266, Download July 08, 2017.
Google Scholar -
Hadri, K. (2000): Testing for stationarity in heterogeneous panel data. Econometrics Journal 3: 148–161.
Google Scholar -
Hadri, K./Kurozumi, E. (2012): A simple panel stationarity test in the presence of serial correlation and a common factor, Economics Letters, Elsevier, vol. 115(1): pages 31–34.
Google Scholar -
Herwartz, H./Maxand, S./Raters, F./Walle, Y. (2018): Panel unit-root tests for heteroskedastic panels, The Stata Journal, Volume 18 Number 1: pp. 184–196.
Google Scholar -
Herwartz, H./Maxand, S./Walle, Y. (2017): Heteroscedasticity-robust unit root testing for trending panels. Center for European, Governance and Economic Development Research Discussion Papers 314, University of Goettingen, Department of Economics. http://econpapers.repec.org/paper/zbwcegedp/314.htm.
Google Scholar -
Holz, M. (2007): Asset-Based Reserve Requirements: A New Monetary Policy Instrument for Targeting Diverging Real Estate Prices in the Euro Area, Intervention. Journal of Economics, 4 (2): 331–351.
Google Scholar -
Im, K. S./Pesaran, M. H./Shin, Y. (2003): Testing for unit root in heterogenous panels. Journal of Econometrics 115, 53–74.
Google Scholar -
Issing, O. (2001): The Single Monetary Policy of the European Central Bank: One Size Fits All, International Finance, Volume 4, Issue 3 Winter 2001.
Google Scholar -
Jarque, C. M./Bera, A. K. (1987): A test for normality of observations and regression residuals. International Statistical Review 2: 163–172.
Google Scholar -
Johansen, S. (1995): Likelihood-Based Inference in Cointegrated Vector Autoregressive Models. Oxford: Oxford University Press.
Google Scholar -
Karanasos, M./Koutroumpis, P./Karavias, Y./Kartsaklas, A./Arakelian, V. (2016): Inflation convergence in the EMU, Journal of Empirical Finance, 39, issue PB, p. 241–253.
Google Scholar -
Kravis, I. B./Lipsey, R. E. (1991): The International Comparison Program: Current Status and Problems, in: Hooper, P. Richardson, J. D. (1991) International Economic Transactions: Issues in Measurement and Empirical Research, National Bureau of Economic Research (Book 55), University of Chicago Press.
Google Scholar -
Kwiatkowski, D./Phillips, P. C. B./Schmidt, P./Shin, Y. (1992): Testing the null hypothesis of stationarity against the alternative of a unit root: How sure are we that economic time series have a unit root? Journal of Econometrics, 54, 1992, 159–178.
Google Scholar -
Lee, T./Tse, Y. (1996): Cointegration tests with conditional heteroscedasticity, Journal of Econometrics, 73, issue 2, p. 401–410 Levin et al. (2002): Levin, A./Lin C.-F./C.-S. J. Chu. 2002. Unit root tests in panel data: Asymptotic and ?nite-sample properties. Journal of Econometrics 108: 1–24.
Google Scholar -
MacKinnon, J. (1990): Critical Values for Cointegration Tests. Queen’s Economics Department Working Paper No. 1227, Queen’s University, Kingston, Canada, http://ideas.repec.org/p/qed/wpaper/1227.html.
Google Scholar -
Maurer, R. (2010): Die Verschuldungskrise der Europäischen Währungsunion – Fiskalische Disziplinlosigkeit oder Konstruktionsfehler?, Vierteljahrshefte zur Wirtschaftsforschung/Quarterly Journal of Economic Research, Vol. 79 (4).
Google Scholar -
Miller, M./Sutherland, A. (1991): The ‘Walters Critique’ of the EMS: A Case of Inconsistent Expectations, The Manchester School Vol LIX Supplement June 1991, pp. 23–37.
Google Scholar -
OECD (2010): Main Economic Indicators – complete database, Main Economic Indicators (database):http://dx.doi.org/10.1787/data-00052-en.
Google Scholar -
Palley, T. (2000): Stabilizing Finance: The Case for Asset Based Reserve Requirements, Financial Markets and Society. The Financial Markets Center, Philmont.
Google Scholar -
Phillips, P. C. B./Perron, P. (1988): Testing for a unit root in time series regression. Biometrika 75: 335–346.
Google Scholar -
Schaffer, M. E. (2010): Stata Module to perform Engle-Granger Cointegration Tests and 2-step ECM estimation, http://ideas.repec.org/c/boc/bocode/s457210.html.
Google Scholar -
Silvapulle, P. S./Podivinsky, J. M. (2000): The effect of non-normal disturbances and conditional heteroscedasticity on multiple cointegration tests, Journal of Statistical Computation and Simulation, 65:1–4, 173–189.
Google Scholar -
Stock, J. H. (1987): Asymptotic properties of least squares estimators of cointegrating vectors, Econometrica 55, 277–302.
Google Scholar -
Svensson, L. E. O. (1999): Price Level Targeting vs. Inflation Targeting: A Free Lunch?, Journal of Money, Credit and Banking, Vol. 31 (1999): 277–295.
Google Scholar -
Westerlund, J. (2015): The effect of recursive detrending on panel unit root tests, Journal of Econometrics 185 (2): 453–467.
Google Scholar
Abstract
The article “The Time Series Properties of the Real Exchange Rates Between the Member States of the European Monetary Union” analyses the time series behavior of the components of the real exchange rates between the founding member states of the EMU before and after the start of the EMU. Various panel and univariate country-specific tests show that the levels of these components are typically random walks. The resulting real exchange rates are also random walks and their components are not cointegrated. It is argued that these results question the operability of the EMU under the current policy regime in the long-run. One possibility to deal with this problem could be the suspension of the principle of a “single monetary policy”.