The dollar-euro exchange rate and monetary fundamentals

Pilbeam, K., Glycopantis, D. & Beckmann, J. (2017). The dollar-euro exchange rate and monetary fundamentals. Empirical Economics,

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Abstract

Abstract This study analyses the relationship between the dollar-euro exchange rate and macroeconomic fundamentals according to the monetary model after 1999. Multivariate and time-varying univariate cointegration techniques are used to test for a long-run equilibrium and changes in the underlying coefficients. Our results provide clear evidence of a long-run relationship between exchange rates and fundamentals. However, we find significant changes in the economic impact of fundamentals on the dollar-euro exchange rate. Both long-run and the short-run coefficients are shown to be strongly time-varying and significantly affected by the financial crisis and the emergence of unconventional monetary policy.

Item Type: Article
Additional Information: The final publication will be available at Springer upon publication at http://link.springer.com/journal/181.
Uncontrolled Keywords: cointegration, euro-dollar exchange rate, time-varying coefficient approach
Subjects: H Social Sciences > HB Economic Theory
Divisions: School of Social Sciences > Department of Economics
URI: http://openaccess.city.ac.uk/id/eprint/16862

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