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The dollar-euro exchange rate and monetary fundamentals

Beckmann, J., Glycopantis, D. & Pilbeam, K. (2017). The dollar-euro exchange rate and monetary fundamentals. Empirical Economics, 54(4), pp. 1389-1410. doi: 10.1007/s00181-017-1335-1


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:
Publisher Keywords: cointegration, euro-dollar exchange rate, time-varying coefficient approach
Subjects: H Social Sciences > HB Economic Theory
Departments: School of Policy & Global Affairs > Economics
SWORD Depositor:
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