The Monetary Model Strikes Back: Evidence from the World

March 1, 2008

Preview Citation

Format: Chicago

Valerie Cerra, and Sweta Chaman Saxena. The Monetary Model Strikes Back: Evidence from the World, (USA: International Monetary Fund, 2008) accessed June 23, 2025

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We revisit the dramatic failure of monetary models in explaining exchange rate movements. Using the information content from 98 countries, we find strong evidence for cointegration between nominal exchange rates and monetary fundamentals. We also find fundamentalsbased models very successful in beating a random walk in out-of-sample prediction.

Subject: Exchange rate adjustments, Exchange rates, Inflation, Monetary base, Personal income

Keywords: Common time, Null hypothesis, WP

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/073
Stock No:

WPIEA2008073
ISBN:

9781451869354
ISSN:

1018-5941

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