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The role of monetary policy in managing the euro - dollar exchange rate

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  • Mylonidis, Nikolaos
  • Stamopoulou, Ioanna

Abstract

The US Federal Reserve’s new relaxed monetary policy (the so-called quantitative easing) has triggered controversy among economists and policy makers about its effectiveness. This paper investigates the role of monetary policy in managing the euro – dollar exchange rate via alternative cointegration tests and impulse response functions. It is found that monetary fundamentals have neither long- nor short-run impact on the exchange rate. This implies that the Fed’s quantitative easing schemes are unlikely to have any significant impact on the euro – dollar rate.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29291.

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Date of creation: 01 Mar 2011
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Handle: RePEc:pra:mprapa:29291

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Keywords: Exchange rates; Monetary model; Cointegration; Impulse response functions;

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  15. Joscha Beckmann & Ansgar Belke & Michael Kühl, 2011. "The dollar-euro exchange rate and macroeconomic fundamentals: a time-varying coefficient approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 147(1), pages 11-40, April.
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