Real exchange rates and real interest rates once again: a multivariate panel cointegration analysis

Abstract

This paper employs multivariate panel cointegration techniques to re-examine the empirical relationship between bilateral real exchange rates and real interest rates. The results from a panel of 1470 quarterly observations on Canada, France, Germany, Italy, Japan, UK, and USA over the period 1977 to 1994 indicate the absence of any long-run relationship between the two variables.