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The Euro-Dollar Exchange Rate: Is it Fundamental?

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Author Info
Camarero, Mariam
Ordonez, Javier
Tamarit, Cecilio

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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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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 798.

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

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

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
F31 - International Economics - - International Finance - - - Foreign Exchange

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Sourafel Girma, 2003. "Absorptive capacity and productivity spillovers From FDI: a threshold regression analysis," European Economy Group Working Papers 25, European Economy Group. [Downloadable!]
    Other versions:
  2. 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. [Downloadable!]
  3. 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 2007-15, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
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