Time-Varying Fundamentals of the Euro-Dollar Exchange Rate

Kari Heimonen

International Economic Journal, 2006, vol. 20, issue 4, 385-407

Abstract: This study examines changes in the impact of the economic fundamentals on the euro-dollar exchange rate. First, the monetary model is augmented with the equity markets and the model is estimated in its structural form. Second, the time-varying impacts of the long-run fundamentals representing equilibrium in different markets on the euro-dollar exchange rate are examined using Kalman filtering. The time-varying structural model indicated that the relative importance of the different fundamentals was not equal and the impact of the fundamentals was time-dependent.

Keywords: Exchange rate; euro-dollar; structural form; Kalman filtering (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1080/10168730600883515

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