The monetary model of exchange rate determination: the case of Greece (1974–1994)
by Aristidis Bitzenis, John Marangos
International Journal of Monetary Economics and Finance (IJMEF), Vol. 1, No. 1, 2007

Abstract: The flexible-price monetary model is examined for the Greek drachma-US dollar exchange rate. The Johansen multivariate technique of co-integration is applied to an unrestricted form of the monetary model. Using quarterly data covering the period 1974–1994, strong evidence is found in favour of the existence of co-integration between the nominal exchange rate, relative money supply, relative income and relative interest rates. The monetary model is validated as a long-run equilibrium condition.

Online publication date: Sun, 02-Dec-2007

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