Determining an equilibrium euro/dollar exchange rate : a cointegration approach
Björkstén, Nils; Kim, Byung-Yeon (15.03.2000)
Numero
3/2000Julkaisija
Suomen Pankki
2000
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-201408071331Tiivistelmä
We apply cointegration techniques to monthly euro/dollar exchange rate data from 1990-1999.The evidence suggests the existence of a stable relationship between the exchange rates, price levels and interest rates.This relationship between the dollar and the euro is used to forecast developments in 2000, and the forecast is compared with observed data.Results suggest that the euro exchange rate has in recent months been deviating from the cointegration relationship.This suggests that a structural break may have occurred during the current year.