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Determinants of Euro against US Dollar Rate of Exchange (USD/EUR) in the Long Run

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  • SÅ‚awomir I. Bukowski
  • Joanna E. Bukowska

Abstract

The paper is a result of research which aimed to identify the factors determining the USD/EUR rate of exchange and the strength of the influence in the long run. In the research we used the Frenkel - Bilson model and an econometric model built on its basis. In the research we formulated a hypothesis that the USD/EUR rate of exchange is determined in an economic and statistically significant way by the following factors: M1 and M2 money supply in the euro area and USA, changes in the GDP rate of growth in the euro area and USA, changes in long term treasury bond yield to maturity in the euro area and USA. The results of the research confirmed the above hypothesis.

Suggested Citation

  • SÅ‚awomir I. Bukowski & Joanna E. Bukowska, 2015. "Determinants of Euro against US Dollar Rate of Exchange (USD/EUR) in the Long Run," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 48-57.
    • Handle: RePEc:ers:ijebaa:v:iii:y:2015:i:2:p:48-57
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    References listed on IDEAS

    as
    1. Frenkel, Jacob A, 1976. " A Monetary Approach to the Exchange Rate: Doctrinal Aspects and Empirical Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 78(2), pages 200-224.
    2. Bilson, John F O, 1978. "The Current Experience with Floating Exchange Rates: An Appraisal of the Monetary Approach," American Economic Review, American Economic Association, vol. 68(2), pages 392-397, May.
    3. Eleftherios Thalassinos & Konstantinos Liapis & John Thalassinos, 2014. "The Role of the Rating Companies in the Recent Financial Crisis in the Balkan and Black Sea Area," Contributions to Economics, in: Anastasios Karasavvoglou & Persefoni Polychronidou (ed.), Economic Crisis in Europe and the Balkans, edition 127, pages 79-115, Springer.
    4. Eleftherios J. Thalassinos & Evagelos D. Politis, 2012. "The Evaluation of the USD Currency and the Oil Prices: A Var Analysis," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 137-146.
    5. Eleftherios I. Thalassinos & Theodoros Stamatopoulos & Pantelis E. Thalassinos, 2015. "The European Sovereign Debt Crisis and the Role of Credit Swaps," World Scientific Book Chapters, in: Anastasios G Malliaris & William T Ziemba (ed.), THE WORLD SCIENTIFIC HANDBOOK OF FUTURES MARKETS, chapter 20, pages 605-639, World Scientific Publishing Co. Pte. Ltd..
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    More about this item

    Keywords

    theories of exchange rate; asset theories; Frenkel-Bilson model; long run determinants of exchange rate; cointegration of time series.;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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