Exchange rates and fundamentals

Charles Engel and Kenneth West ()

No 248, Working Paper Series from European Central Bank

Abstract: Standard economic models hold that exchange rates are influenced by fundamental variables such as relative money supplies, outputs, inflation rates and interest rates. Nonetheless, it has been well documented that such variables little help predict changes in floating exchange rates -- that is, exchange rates follow a random walk. We show that the data do exhibit a related link suggested by standard models JEL Classification: F31, F37, G15, G12

Keywords: asset price; exchange rates; monetary model; present value; random walk (search for similar items in EconPapers)
Date: 2003-08
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Citations: View citations in EconPapers (17)

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Related works:
Working Paper: Exchange Rates and Fundamentals (2004)
Journal Article: Exchange rates and fundamentals (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2003248

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