The Euro-Dollar Exchange Rate: Is it Fundamental?

35 Pages Posted: 27 Nov 2002

See all articles by Mariam Camarero

Mariam Camarero

Jaume I University - Department of Economics

Javier Ordóñez Monfort

Jaume I University - Department of Economics

Cecilio R. Tamarit

University of Valencia - Department of Applied Economics

Date Written: October 2002

Abstract

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.

Keywords: Real Exchange Rate, Cointegration, Time-series, Panel, Dollar, Euro-zone

JEL Classification: C33, F31

Suggested Citation

Camarero Olivas, María Amparo (Mariam) and Ordóñez Monfort, Javier and Tamarit Escalona, Cecilio R., The Euro-Dollar Exchange Rate: Is it Fundamental? (October 2002). CESifo Working Paper Series No. 798. Available at SSRN: https://ssrn.com/abstract=348460

María Amparo (Mariam) Camarero Olivas (Contact Author)

Jaume I University - Department of Economics ( email )

Campus del Riu Sec.
E-12071 Castellon
Spain

Javier Ordóñez Monfort

Jaume I University - Department of Economics ( email )

Campus del Riu Sec.
E-12071 Castellon
Spain

Cecilio R. Tamarit Escalona

University of Valencia - Department of Applied Economics ( email )

4F04 Edificio Departamental Oriental
P.O. Box 22.006
Valencia, 33006
Spain
+34-963828349 (Phone)
+34-963828354 (Fax)

HOME PAGE: http://www.uv.ed/~tamac/

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