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Title: |
Time-Varying Fundamentals of the Euro-Dollar Exchange Rate |
| Author: |
Heimonen, Kari |
| Author
Affiliation: |
University of Jyväskylä, Finland |
| Source: |
International Economic Journal, December 2006, v. 20, no. 4, pp. 385-408 |
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Publication Date: |
December 2006 |
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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.
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