A Standard Monetary Model and the Variability of the Deutschemark-Dollarexchange Rate
Kenneth D. West
University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)
NBER Working Paper No. w2102
This paper uses a novel teat to see whether the Herse (1985) and Woo (1985) models are consistent with the variability of the deutschemark - dollar exchange rate 1974-1984. The answer, perhaps surprisingly, is yes. Both models, however, explain the month to month variability as resulting in a critical way from unobservable shocks to money demand and purchasing power parity. It would therefore be of interest in future work to model one or both of these shocks as explicit functions of economic variables.
Number of Pages in PDF File: 57working papers series
Date posted: March 9, 2004
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