Retesting the Monetary Approach to Foreign Exchange Rates: The Case of the US Dollar
Bibliographic record
Abstract
This paper estimates successfully a version of the monetary approach to foreign exchange rates applied to the US dollar for the post-1973 floating exchange rate period. Although this approach has lately fallen in disrepute, the statistical evidence is strongly in support of the model. The results conform to expectations. All coefficients have the correct sign and are highly significant statistically. The null hypothesis that the coefficient on the money stock variable is equal to +1 fails to be rejected in all four estimated regressions. This reflects money neutrality. The null hypothesis that the coefficient on the scale variable is equal to -1 fails to be rejected in all these four regressions. This means that there are neither economies nor diseconomies of scale for aggregate income. The joint null hypothesis that both of the above two constraints hold fails to be rejected at marginal significance levels much higher than 10% for the first two regressions and fails to be rejected at a marginal significance level higher than 2% for the last two regressions. Finally, the adjustment to the long run falls upon the real interest rate and probably upon the scale variable. There is evidence that the foreign exchange rate, the money supply, and the nominal interest rate are all weakly exogenous. One implication of this study is that businesses, economists, individual investors, central bankers and policy-makers should have a more benign look upon fluctuations in foreign exchange rates, and should become convinced that these fluctuations are determined by fundamental forces.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.010 | 0.034 |
| Meta-epidemiology (narrow) | 0.001 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.003 | 0.003 |
| Science and technology studies | 0.001 | 0.002 |
| Scholarly communication | 0.005 | 0.004 |
| Open science | 0.002 | 0.002 |
| Research integrity | 0.002 | 0.004 |
| Insufficient payload (model declined to judge) | 0.003 | 0.001 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".