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Macroeconomic fundamentals and exchange rates: a non-parametric cointegration analysis

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  • Emmanuel Davradakis

Abstract

This paper examines in a non-parametric setup whether a long-run relationship exists between monetary fundamentals and the dollar spot exchange rates for 19 countries. Although the Johansen's parametric approach failed to retrieve a long-relationship for any of the countries considered, the Bierens (1997a) non-parametric approach suggests that there is one cointegrating relationship for the majority of the countries considered. In addition, the [1, -1] cointegrating vector between the fundamentals and the log-level of the dollar exchange rate could not be rejected in the non-parametric formulation.

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  • Emmanuel Davradakis, 2005. "Macroeconomic fundamentals and exchange rates: a non-parametric cointegration analysis," Applied Financial Economics, Taylor & Francis Journals, vol. 15(7), pages 439-446.
    • Handle: RePEc:taf:apfiec:v:15:y:2005:i:7:p:439-446
    DOI: 10.1080/09603100500056593
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