We show that empirical results concerning the behavior of floating exchange rates differ between otherwise identical cointegrated and non-cointegrated VAR models. In particular, virtually all ten-year movements in nominal exchange rates are due to fundamental supply and demand shocks when long...

Long-run purchasing power is tested on 16 OECD countries using data from 1960 to 1994; PPP is rejected for some countries (Canada, Japan, Switzerland, Austria, Italy and Spain) and not rejected for others (Sweden, France, Holland and the United Kingdom). For the latter countries, impulse response...