This paper applies the concept of cointegration to analyze the foreign
exchange market during the 1920s. The data set consists of daily spot
and forward exchange rates for the U.S. dollar, French franc, Belgian
franc, Italian lira and German mark, each quoted with respect to the
British pound. The authors find that the future spot and forward excha
nge rates for the U.S., France, Belgium, and Italy are cointegrated. U
sing a multivariate test for cointegration, they find no evidence of c
ointegration across markets. There is weak evidence of cointegration a
mong the two neighboring economies of France and Belgium.