Identification and estimation of exchange rate models with unobservable fundamentals

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    2 Citations (Scopus)

    Abstract

    This article is concerned with issues of model specification, identification, and estimation in exchange rate models with unobservable fundamentals. We show that the continuous-time model proposed by Gardeazabal, Regulez, and Vazquez (International Economic Review 38 (1997), 389-404) is not identified and that this property is characteristic of the discrete-time representation of the model that they used as the basis for estimation by simulated method of moments. We briefly discuss the implications of this result in the context of the asset-market model of exchange rates with unobservable fundamentals.

    Original languageEnglish
    Pages (from-to)573-582
    Number of pages10
    JournalInternational Economic Review
    Volume47
    Issue number2
    DOIs
    Publication statusPublished - May 2006

    Keywords

    • Volatility
    • Dynamics

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