This paper presents tests of long run macroeconomic relations involving interest
rates, equity, prices and exchange rates suggested by arbitrage in financial and
goods markets. It uses the global vector autoregressive (GVAR) model to test for
long run restrictions in each country/region conditioning on the rest of the world.
Bootstrapping is used to compute both the empirical distribution of the impulse responses
and the log-likelihood ratio statistic for over-identifying restrictions. The paper
also examines the speed with which adjustments to the long run relations take place
via the persistence profiles. It finds strong evidence in favour of a long run version
of uncovered interest parity and to a lesser extent the Fisher equation across a
number of countries, but the test results for the purchasing power parity relation
are much weaker. Also the transmission of shocks and subsequent adjustments in financial
markets are much faster than those in goods markets.