Arbeitspapier

How stable are monetary models of the Dollar-Euro exchange rate? A time-varying coefficient approach

This paper examines the significance of different fundamental regimes by applying various monetary models of the exchange rate to one of the politically most important exchange rates, the exchange rate of the US dollar vis-à-vis the euro (the DM). We use monthly data from 1975:01 to 2007:12. Applying a novel time-varying coefficient estimation approach, we come up with interesting properties of our empirical models. First, there is no stable long-run equilibrium relationship among fundamentals and exchange rates since the breakdown of Bretton Woods. Second, there are no recurring regimes, i.e. across different regimes either the coefficient values for the same fundamentals differ or the significance differs. Third, there is no regime in which no fundamentals enter. Fourth, the deviations resulting from the stepwise cointegrating relationship act as a significant error-correction mechanism. In other words, we are able to show that fundamentals play an important role in determining the exchange rate although their impact differs significantly across different sub-periods.

Sprache
Englisch

Erschienen in
Series: DIW Discussion Papers ; No. 944

Klassifikation
Wirtschaft
Financial Markets and the Macroeconomy
Foreign Exchange
Asset Pricing; Trading Volume; Bond Interest Rates
Thema
Structural exchange rate models
cointegration
structural breaks
switching regression
time-varying coefficient approach
Wechselkurs
US-Dollar
Euro
Monetäre Wechselkurstheorie
Kointegration
Strukturbruch
Regression
Schätzung
USA
EU-Staaten
Deutschland

Ereignis
Geistige Schöpfung
(wer)
Beckmann, Joscha
Belke, Ansgar
Kühl, Michael
Ereignis
Veröffentlichung
(wer)
Deutsches Institut für Wirtschaftsforschung (DIW)
(wo)
Berlin
(wann)
2009

Handle
Letzte Aktualisierung
10.03.2025, 11:41 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Beckmann, Joscha
  • Belke, Ansgar
  • Kühl, Michael
  • Deutsches Institut für Wirtschaftsforschung (DIW)

Entstanden

  • 2009

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