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The Euro-Dollar Exchange Rate: Is it Fundamental?

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  • Mariam Camarero
  • Javier Ordóñez
  • Cecilio Tamarit

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.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 798.

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Date of creation: 2002
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Handle: RePEc:ces:ceswps:_798

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Keywords: real exchange rate; cointegration; time-series; panel; dollar; Euro-zone;

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References

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Cited by:
  1. Juan Carlos Cuestas & Javier Ordoñez & Mariam Camarero, 2007. "The Role Of Commodity Terms Of Trade In Determining The Real Exchange Rates Of Mediterranean Countries," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2007-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. Marçal, Emerson Fernandes, 2013. "Exchange rate misalignments, interdependence, crises, and currency wars: an empirical assessment," Textos para discussão 348, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  3. Sourafel Girma, 2005. "Absorptive Capacity and Productivity Spillovers from FDI: A Threshold Regression Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(3), pages 281-306, 06.
  4. Jaime Turrion & Carmela Martin, 2003. "Eastern Enlargement of the European Union and Foreign Direct Investment Adjustments," European Economy Group Working Papers 24, European Economy Group.

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