Do Market Fundamentals Determine the Dollar-Euro Exchange Rate?
MetadataShow full item record
The study searches for an optimal Dollar–Euro exchange rate policy for the US and the Euro Area (EA) countries. To achieve this, it explores the causal links between the US Dollar–Euro exchange rate and three key macroeconomic variables. The empirical investigation is carried out in an Error Correction Vector Autoregressive (ECVAR) framework based on the theory of cointegration and error-correction representation of cointegrated variables. The results provide evidence in favor of the presence of a long-run relationship between the exchange rate and the spread between US and EA (Eurozone) interest rates. With respect to the direction of causality, the empirical findings show that in the long and short-run there is a uni-directional causal relationship between interest-rate spreads and the US Dollar–Euro exchange rate. This result constitutes a strong message for policy advising to fiscal and monetary authorities on both sides of the Atlantic, and beyond.
Showing items related by title, author, creator and subject.
Haque, M.; Topal, Erkan; Lilford, E. (2015)The United States (US) dollar-based gold price and the exchange rate between the Australian dollar and the US dollar (AUD/USD) have a combined and significant impact on both the trend of the Australian minerals industry ...
Haque, M.; Topal, Erkan; Lilford, E. (2015)Continued strong Chinese demand for Australia's iron ore has ensured that this commodity is singularly the highest value-ranking, exported mineral commodity for this country. As a consequence, the iron ore price and the ...
Hassan, AFM Kamrul (2010)This thesis examines the relationship between population structure and the real exchange rate in 23 OECD countries over the period 1980–2006. The motivation for this research stems mainly from the Life-Cycle Hypothesis ...