Third-Currency Effects in a Tri-Polar Model of Foreign Exchange

Martin Melecký

International Finance from University Library of Munich, Germany

Abstract: This paper investigates possible contribution of third-currency effects to exchange rate movements. It reopens the subject of currency substitution and examines whether the third-currency effects change when the third-currency is a complement as opposed to when it is a substitute for currencies appearing in a bilateral exchange rate quote. The analysis and tests are carried out within a simple macro-econometric model with one common permanent component driving the system of bilateral exchange rates for the US dollar, the Japanese yen and the euro.

Keywords: Exchange Rate Modeling; Currency Substitution; Third-currency Effects (search for similar items in EconPapers)
JEL-codes: F31 F36 F42 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2005-04-29
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-sea
Note: Type of Document - pdf; pages: 25
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpif:0504011

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