We emphasize the importance of properly identifying the long-run relations underlying the monetary model of the exchange rate. The separate estimation of long-run money demands leads to a 'structural' error correction equation which allows an interpretation of the various channels affecting the...

In this note an alternative to the widely used reduced - form tests of the monetary model of the exchange rate is proposed. It is shown that the reduced form approach rests on implausible parameter restrictions which can be easily avoided by estimating the long-run money demand functions...

Using data including the most recent recession and employing two different definitions of recessions, this article examines the ability of the term spread of interest rates to predict recessions for seven countries. The empirical results indicate that the predictive power of the term spread is...

We examine the role of expectations for interest rates on mortgage loans. Our empirical results, based on cointegration tests, indicate a violation of the expectations hypothesis on the German loan market. In contrast to the capital market, a failure of the expectations hypothesis on the loan...

Although stable money demand functions are crucial for the monetary model of the exchange rate, empirical research on exchange rates and money demand is more or less disconnected. This paper tries to fill the gap for the euro/dollar exchange rate. We investigate whether monetary disequilibria...

This paper investigates various theories explaining banks' overbidding in the fixed rate tenders of the European Central Bank (ECB). Using auction data from both the Bundesbank and the ECB, we show that none of the theories can on its own explain the observed overbidding. This implies that the...