Empirical exchange rate models and shifts in the co-integrating vector

Michael D. Goldberg, Roman Frydman

    Research output: Contribution to journalArticlepeer-review


    This paper finds that many of the anomalies in the exchange rate literature can be explained in large measure by recurrent shifts in the co-integrating vector. We find that the co-integrating vector implied by a composite monetary model experiences parameter shifts on five occasions over the modern period of floating. Within the implied regimes of relative parameter constancy we find that parameter estimates are mostly significant and of the correct sign. We also find co-integration and considerable improvement in the out-of-sample fit on the part of all the structural models examined.

    Original languageEnglish (US)
    Pages (from-to)55-78
    Number of pages24
    JournalStructural Change and Economic Dynamics
    Issue number1
    StatePublished - Mar 1996


    • Exchange rates
    • Expectations
    • Imperfect knowledge

    ASJC Scopus subject areas

    • Economics and Econometrics


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