Determinants of euro-dollar exchange rate: an empirical analysis

Vivek Bhargava, Daniel Konku and Dheeraj Bhargava

Afro-Asian Journal of Finance and Accounting, 2012, vol. 3, issue 2, 121-135

Abstract: This study investigates the determinants of euro-dollar exchange rate since the inception of euro in January 1999. Initial results show that relative changes in consumer confidence in the USA and the Eurozone (CCI), relative consumer price index (CPI), unemployment rate (UMP), and money supply (M1) are important in explaining the value of the euro relative to the US dollar. When accounted for autocorrelation and heteroscedasticity in the data, vector autoregression/vector error correction models (VAR/VECM) show that the euro-dollar exchange rate is impacted by only CCI and M1.

Keywords: exchange rates; exchange rate determinants; euro-dollar exchange rate; consumer confidence; USA; United States; Eurozone; consumer price index; relative CPI; unemployment rate; money supply; euro; dollar. (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:ids:afasfa:v:3:y:2012:i:2:p:121-135

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