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How well can monetary factors explain the exchange rate of the euro?

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  • Michael Frenkel
  • Isabell Koske

Abstract

This paper uses different versions of the monetary approach to the exchange rate in order to investigate how well this approach can explain the nominal exchange rate of the euro vis-à-vis six currencies during the recent past. It studies the period 1980–2003 and uses data on the euro for the period since the euro was launched and values for the synthetic euro for the period preceding European Monetary Union. The results of the estimation are mixed. While they suggest that a long-run relationship between the variables included in the monetary model exists for five out of six currencies, the individual countries studied seem to support different versions of the model. Copyright International Atlantic Economic Society 2004

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  • Michael Frenkel & Isabell Koske, 2004. "How well can monetary factors explain the exchange rate of the euro?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 32(3), pages 233-244, September.
    • Handle: RePEc:kap:atlecj:v:32:y:2004:i:3:p:233-244
    DOI: 10.1007/BF02299441
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    Cited by:

    1. Lee Chin & M. Azali & Zulkornain Yusop & Mohammed Yusoff, 2007. "The monetary model of exchange rate: evidence from The Philippines," Applied Economics Letters, Taylor & Francis Journals, vol. 14(13), pages 993-997.
    2. Rakesh K. Bissoondeeal & Michail Karoglou & Alicia M. Gazely, 2011. "Forecasting The Uk/Us Exchange Rate With Divisia Monetary Models And Neural Networks," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(1), pages 127-152, February.
    3. Stephanos Papadamou & Thomas Markopoulos, 2012. "The Monetary Approach to the Exchange Rate Determination for a “Petrocurrency”: The Case of Norwegian Krone," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 18(3), pages 299-314, August.
    4. Mylonidis, Nikolaos & Stamopoulou, Ioanna, 2011. "The role of monetary policy in managing the euro - dollar exchange rate," MPRA Paper 29291, University Library of Munich, Germany.
    5. Xie, Zixiong & Chen, Shyh-Wei, 2019. "Exchange rates and fundamentals: A bootstrap panel data analysis," Economic Modelling, Elsevier, vol. 78(C), pages 209-224.
    6. Papadimitriou, Theophilos & Gogas, Periklis & Plakandaras, Vasilios, 2013. "Forecasting the NOK/USD Exchange Rate with Machine Learning Techniques," DUTH Research Papers in Economics 5-2013, Democritus University of Thrace, Department of Economics.
    7. Lee, Chin & M., Azali, 2005. "Exchange rate misalignments in ASEAN-5 countries," MPRA Paper 59169, University Library of Munich, Germany.
    8. Habimana, Olivier, 2017. "The multiscale relationship between exchange rates and fundamentals differentials: Empirical evidence from Scandinavia," MPRA Paper 75956, University Library of Munich, Germany.

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