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Does the US international debt affect the euro/dollar exchange rate?



The impact of the US international debt on the euro/dollar exchange rate is examined in the context of an Error Correction monetary model with rational expectations. Overall, the relative real income is the most economically significant determinant, whereas the debt is the most statistically significant determinant..

Suggested Citation

  • Costas Karfakis, 2008. "Does the US international debt affect the euro/dollar exchange rate?," Discussion Paper Series 2008_06, Department of Economics, University of Macedonia, revised Sep 2008.
  • Handle: RePEc:mcd:mcddps:2008_06

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    References listed on IDEAS

    1. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    2. Costas Karfakis, 2006. "Is there an empirical link between the dollar price of the euro and the monetary fundamentals?," Applied Financial Economics, Taylor & Francis Journals, vol. 16(13), pages 973-980.
    3. Domenico Sartore & Lucia Trevisan & Michele Trova & Francesca Volo, 2002. "US dollar/Euro exchange rate: a monthly econometric model for forecasting," The European Journal of Finance, Taylor & Francis Journals, vol. 8(4), pages 480-501.
    4. Asmara Jamaleh, 2002. "Explaining and forecasting the euro/dollar exchange rate through a non-linear threshold model," The European Journal of Finance, Taylor & Francis Journals, vol. 8(4), pages 422-448.
    5. Robin Brooks & Hali Edison & Manmohan S. Kumar & Torsten Sl√łk, 2004. "Exchange Rates and Capital Flows," European Financial Management, European Financial Management Association, vol. 10(3), pages 511-533.
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    More about this item


    Monetary model; US international debt; co-integration analysis; error correction model;

    JEL classification:

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

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