The purpose of this paper is to construct a model of exchange rate determination that is consistent with the stylized facts regarding the uncovered interest parity for short term and long term interest rates. This task is especially challenging because of the forward premium anomaly found for...

Error correction models are widely used to estimate dynamic cointegrated systems. In most applications error correction models are reduced form models. As a result, non-structural speed of adjustment coefficients are estimated in these applications. A single equation instrumental variable method...

This paper proposes two estimators based on asymptotic theory to estimate structural parameters with spurious regressions involving unit-root nonstationary variables. This approach motivates a Hausman-type test for the null hypothesis of cointegration for dynamic Ordinary Least Squares...

We use a residual-based bootstrap method to re-examine the finding of the Granger causality relationship from exchange rates to fundamentals in Engel and West (Exchange rate and fundamentals, Journal of Political Economy 2005, 113 (3), 485–517), in which the evidence for the relation is taken...