We re-examine the monetary approach to the exchange rate from a number of perspectives, using monthly data on the deutschemark-dollar exchange rate. Using the Campbell-Shiller technique for testing present value models, we reject the restrictions imposed upon the data by the forward-looking...

Since the objective of economic policy is to change target variables in the DGP, when economic policy analysis uses an econometric model, it is important that the model delivers reliable inferences about policy responses in the DGP. This requires that the model be congruent and encompassing, and...

Several studies have developed empirical models of U.K. money demand using the century of annual and phase-average data in Friedman and Schwartz (1982). The current paper evaluates key models from those studies, employing tests of constancy and encompassing. The evidence strongly favors an...