of the existence of a unit root and, therefore, the residual series are stationary. Thus, these
equations characterize the long-run equilibrium real exchange rate as a function of the
sustainable values of the macroeconomic fundamentals.
Table 5
Poland: long run equilibrium relation (equation (3)) for real exchange rate
(1995:01 2001:12)
Coefficients estimates
(t-statistic)
Variable
Specification 1 Specification 21
Static OLS Dynamic OLS
(1995:01 - 2001:12) (1995:06 - 2001:09)
|
Constant |
3.985652 (26.67) |
2.212040 (2.67) |
|
TREND |
0.005244 |
0.005543 |
|
(16.40) |
(9.92) | |
|
log(TOT) |
-0.072145 |
-0.792039 |
|
(-1.48) |
(-3.26) | |
|
FLOW |
0.565288 |
0.933904 |
|
(6.30) |
(4.77) | |
|
log(OPEN) |
-0.041937 |
-0.181601 |
|
(-0.76) |
(-1.48) | |
|
log(GOV) |
-0.034432 |
-0.825301 |
|
(-0.48) |
(-2.09) | |
|
R2 |
0.87 |
0.92 |
|
Adjusted R2 |
0.86 |
0.88 |
Unit Root Tests for residual2
|
ADF Statistic |
-3.67(1) |
-8.09(0) |
|
Phillips-Perron Statistic |
-2.93(7) |
-8.09(2) |
|
1% Critical Value |
-5.04 |
-5.04 |
|
5% Critical Value |
-4.20 |
-4.20 |
1 Dynamic OLS corrects for serial correlation and endogeneity of the regressors, as
recommended by Hamilton (1994, pp. 608 - 612) and Hayashi (2000, pp. 650 - 665). Along
with the fundamentals in levels, the first differences as well as first differences with up to three
period lags and four period leads were also considered. Here, for lack of space only the
24
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