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Journal of Economic Integration 1998 December;13(4) :607-625.
L o n g - run and Short - run Effects of Exchange Rate Movements for Major EU Countries: Cointegration and Erro r- C o rrection Modeling
Manuel Cantavella-Jordá and 
Celestino Suárez-Burguet 
Universitat Jaume I and Instituto de Economía Internacional
Copyright ©1998 Journal of Economic Integration
This paper examines the long-run and short - run effects of depre c i a t i o n / devaluation for major European Union countries (Germ a n y, France, the Unit ed Kingdom, and Italy) over the 1975-1997 period. The approach is based on cointegration techniques proposed by Johansen [1988] and uses quarterly data. The empirical results indicate the existence of a positive relationship between the exchange rate and the trade balance for each country although long-ru n e ffects are rather moderate. According to the short - run analysis, there is a find ing of a J-curve for Italy and the United Kingdom. The costs of re l i n q u i s h i n g individual exchange rates may be rather small for major EU countries. (JEL Classification: F31, F41)
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2. Muscatelli, V. A. and Hurn, S. [1992], "Cointegration and Dynamic Ti m e Series Models," Journal of Economic Surveys 6; pp. 1-37.
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