TY  - JOUR
AU  - Helliwell,John F.
AU  - Boothe,Paul M.
TI  - Macroeconomic Implications of Alternative Exchange Rate Models
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 904
PY  - 1982
Y2  - June 1982
UR  - http://www.nber.org/papers/w0904
L1  - http://www.nber.org/papers/w0904.pdf
N1  - Author contact info:
John F. Helliwell
Vancouver School of Economics
University of British Columbia
997-1873 East Mall
Vancouver BC V6T 1Z1
CANADA
Tel: 604/822-4953
Fax: 604/822-5915
E-Mail: john.helliwell@ubc.ca
AB  - In this paper we estimate and compare several alternative exchange rate models that have received wide attention, but little comparison, during the 1970s. In order to compare purchasing power parity (PPP), nominal interest rate parity, real interest rate parity, and portfolio balance models, we first strip each down to its essential core and undertake comparable single-equation tests of both 'hard' and 'easy' (more and less constrained) versions of each model. We then embed each of the 'hard' versions in a new macroeconomic model of Canada, and assess their implications for the impacts of monetary and fiscal shocks. Using annual Canadian data from the 1950s and 1970s, all of the models have single-equation errors of about 3%, except for the 'hard' versions of PPP and real interest parity, which are heavily rejected by the data. In a macroeconomic context, the models have modestly different implications for the effects of fiscal shocks, and diverge more widely under monetary shocks.
ER  -