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The dollar-euro exchange rate and monetary fundamentals

Beckmann, J., Glycopantis, D. and Pilbeam, K. (2017). The dollar-euro exchange rate and monetary fundamentals. Empirical Economics, doi: 10.1007/s00181-017-1335-1

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.

Publication Type: Article
Additional Information: This is a post-peer-review, pre-copyedit version of an article published in Empirical Economics. The final authenticated version is available online at: http://dx.doi.org/10.1007/s00181-017-1335-1.
Publisher Keywords: cointegration, euro-dollar exchange rate, time-varying coefficient approach
Subjects: H Social Sciences > HB Economic Theory
Departments: School of Arts & Social Sciences > Economics
URI: http://openaccess.city.ac.uk/id/eprint/16862
[img] Text - Accepted Version
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