How well can monetary factors explain the exchange rate of the euro?


This paper uses different versions of the monetary approach to the exchange rate in order to investigate how well this approach can explain the nominal exchange rate of the euro vis-à-vis six currencies during the recent past. It studies the period 1980–2003 and uses data on the euro for the period since the euro was launched and values for the synthetic euro for the period preceding European Monetary Union. The results of the estimation are mixed. While they suggest that a long-run relationship between the variables included in the monetary model exists for five out of six currencies, the individual countries studied seem to support different versions of the model.

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Frenkel, M., Koske, I. How well can monetary factors explain the exchange rate of the euro?. Atlantic Economic Journal 32, 233–244 (2004).

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  • Exchange Rate
  • International Economic
  • Public Finance
  • Recent Past
  • Individual Country