Why Has the Euro Been Falling? An Investigation into the Determinants of the Exchange Rate
This paper reconsiders the determinants of the exchange rate by studying the historical episode after the fall of the Iron Curtain. Testing a modified portfolio balance model, we attribute the strength of the deutschmark in the early nineties and the puzzling decline of the euro during its virtual existence to changes in the demand for deutschmarks in eastern Europe and to variations in the demand for black money balances in Europe as a whole. We reject the view that the strength of the dollar and the weakness of the euro reflect the prosperity of the US and the weakness of the European economy on both theoretical and empirical grounds.
|Date of creation:||Jul 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
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.:
- Hans-Werner Sinn & Holger Feist, 2000. "Seignorage Wealth in the Eurosystem: Eurowinners and Eurolosers Revisited," CESifo Working Paper Series 353, CESifo Group Munich.
- Newey, Whitney & West, Kenneth, 2014.
"A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix,"
Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
- Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
- Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
- Ronald Macdonald & Mark P. Taylor, 1993.
"The Monetary Approach to the Exchange Rate: Rational Expectations, Long-Run Equilibrium, and Forecasting,"
IMF Staff Papers,
Palgrave Macmillan, vol. 40(1), pages 89-107, March.
- Ronald MacDonald & Mark P. Taylor, 1992. "The Monetary Approach to the Exchange Rate; Rational Expectations, Long-Run Equilibrium and Forecasting," IMF Working Papers 92/34, International Monetary Fund.
- Branson, William H. & Halttunen, Hannu & Masson, Paul, 1977. "Exchange rates in the short run: The dollar-dentschemark rate," European Economic Review, Elsevier, vol. 10(3), pages 303-324.
- Mark P. Taylor, 1995. "The Economics of Exchange Rates," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 13-47, March.
- Feldstein, Martin & Horioka, Charles, 1980.
"Domestic Saving and International Capital Flows,"
Royal Economic Society, vol. 90(358), pages 314-29, June.
- Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
- Michael Dooley & Jeffrey Frankel & Donald J. Mathieson, 1987. "International Capital Mobility: What Do Saving-Investment Correlations Tell Us?," IMF Staff Papers, Palgrave Macmillan, vol. 34(3), pages 503-530, September.
- Dooley, Michael & Isard, Peter, 1982. "A portfolio-balance rational-expectations model of the dollar-mark exchange rate," Journal of International Economics, Elsevier, vol. 12(3-4), pages 257-276, May.
- Hans-Werner Sinn, 1983.
"International capital movements, flexible exchange rates, and the IS-LM model : A comparison between the portfolio-balance and the flow hypotheses,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer, vol. 119(1), pages 36-63, March.
- Sinn, Hans-Werner, 1983. "International Capital Movements, Flexible Exchange Rates, and the IS-LM Model: A Comparison Between the Portfolio-Balance and the Flow Hypotheses," Munich Reprints in Economics 19906, University of Munich, Department of Economics.
- Robert Murphy & Carl Duyne, 1980. "Asset market approaches to exchange rate determination: A comparative analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 116(4), pages 627-656, December.
- Hans-Werner Sinn & Holger Feist, 1997.
"Eurowinners and Eurolosers: The Distribution of Seigniorage Wealth in EMU,"
NBER Working Papers
6072, National Bureau of Economic Research, Inc.
- Feist, Holger & Sinn, Hans-Werner, 1997. "Eurowinners and Eurolosers: The Distribution of Seigniorage Wealth in EMU," CEPR Discussion Papers 1747, C.E.P.R. Discussion Papers.
- Sinn, Hans-Werner & Feist, Holger, 1997. "Eurowinners and Eurolosers: The distribution of seigniorage wealth in EMU," Munich Reprints in Economics 19567, University of Munich, Department of Economics.
- Richard D. Porter & Ruth A. Judson, 1996. "The location of U.S. currency: how much is abroad?," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages 883-903.
- Fried, Joel & Howitt, Peter, 1983. "The Effects of Inflation on Real Interest Rates," American Economic Review, American Economic Association, vol. 73(5), pages 968-80, December.
- Jeffrey A. Frankel., 1987. "Monetary and Portfolio Balance Models of Exchange Rate Determination," Economics Working Papers 8752, University of California at Berkeley.
- Barry Eichengreen & Charles Wyplosz, 1993. "The Unstable EMS," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 51-144.
- Seitz, Franz, 1995. "Der DM-Umlauf im Ausland," Discussion Paper Series 1: Economic Studies 1995,01, Deutsche Bundesbank, Research Centre.
- Frankel, Jeffrey A, 1982. "The Mystery of the Multiplying Marks: A Modification of the Monetary Model," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 515-19, August.
- Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:8352. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.