The real-interest-differential model after 20 years

Two decades ago, Frankel reported empirical results favoring the Dornbusch overshooting model. Despite an important theoretical and empirical critique by Driskill and Sheffrin, Frankel's classic empirical results spawned a hu ge literature. We attempt to replicate the Frankel and the Driskill and She ffrin results. We also offer an update and an extended critique of their wo rk. While specialists in international finance generally accept that the in itial promise of Frankel's real-interest-differential model has not been re alized, we believe that many will be surprised nevertheless by our bleak fi ndings. (C) 2001 Elsevier Science Ltd. All rights reserved.