6533b853fe1ef96bd12ad63e
RESEARCH PRODUCT
The Euro-Dollar Exchange Rate: Is it Fundamental?
Mariam CamareroCecilio TamaritJavier Ordóñez Monfortsubject
Error correction modelExchange rateInterest rate parityreal exchange rate cointegration time-series panel dollar Euro-zoneCointegrationModel selectionEconomicsLiberian dollarContext (language use)Monetary economicsReal interest ratedescription
In this paper we have applied two approaches to the study of the dollar real exchange rate in relation with the Euro-area currencies. First, using dynamic panel techniques, we estimate an error correction model for the dollar real exchange rate versus seven developed countries, four of them Euro-area members. Second, we aggregate the European variables and estimate a model for the Euro-dollar real exchange rate using time series techniques. After identification and model selection, the same specification can be adopted in the two cases, in an eclectic model including real interest rate and productivity differentials, together with relative fiscal policy and net foreign asset positions. This model turns out to be compatible with the very recent results obtained in the context of the New Open Macroeconomics literature.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2002-01-01 | SSRN Electronic Journal |