The flexible price monetary model has been studied in different dimensions in various countries for its validity and ability to explain foreign exchange movements. Firstly in the studied conducted by Neely & Sarno (2002) it has been mentioned that monetary model is unable to forecast exchange rate. Further it is said that the better results are witnessed in case of long term horizon rather than short term horizon. On the other hand the study by Mark 91995) argued that the exchange rate could be predicted by the monetary fundamentals in three to four year horizon. Several assumptions are made by Mark in this study wherein stationarity of data, appropriate benchmark for comparison and the vintage of data have been questioned by Faust et al (2001) and Killian (1999)
Considering the study for explaining the relationship between the Turkish Lira and US Dollar over the period from 1987 to 2000 (Civcir) the model successfully monitors the relative price of Turkey Lira. Based on this study it can be said that in the long run the monetary fundamentals have an effect on the exchange rate. Further the inference of the study, that the Turkish Lira was over-valued in comparison to the US Dollar before the crisis in the year 2001.
Lastly the study was conducted for the monetary exchange rate determination in case of Singapore (Yong & Ling). The study shows that the monetary model isn’t quite successful in this case as the explanation isn’t provided for the movement of Singapore Dollar and the US Dollar exchange for the period from 1978 to 1993. Thus the validity of this model is questioned in this model. However it was highlighted that the monetary model can be used successfully if the proper specification and estimation method for the variables are used.