A panel cointegration approach to the estimation of the peseta real exchange rate

In this paper we estimate different specifications of a model for the determination of the bilateral real exchange rate of the peseta relative to nine European Union members. The model is based on Meese and Rogo (1988) monetary approach as extended by MacDonald (1998). The applied econometric techniques are the recent panel cointegration tests developed by Kao (1999), McCoskey and Kao (1998) and Pedroni (1999) for homogeneous and heterogeneous panels. The results are favorable to a model containing relative productivities in tradables and non-tradables and the real interest rate di¤erentials as explanatory variables.