Title: A Portfolio-Based Analysis of Movements in the Euro-Dollar Rate
Abstract: Since its inception on 1 January 1999, the euro, as measured against the US dollar, has experienced a period of sustained weakness followed by a period of sustained strength. After weakening slightly since the beginning of 2005, the euro is currently hovering around its initial value. Conventional models of exchange-rate behaviour (see Isard, 1995) rely on underlying economic fundamentals to explain exchange-rate paths. However, as De Grauwe (2000) discusses, these models do not provide clear guidance for an analysis of the factors driving the fluctuations in the euro, as speculative market activity or other noise can dominate the role of fundamentals in the short term. The movements of the euro/dollar exchange rate are not easily explained, as it is difficult to disentangle the roles of economic fundamentals and 'news' from 'pure noise' (a random walk).KeywordsExchange RateMonetary PolicyCurrent AccountEuro AreaReal Exchange RateThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
Publication Year: 2007
Publication Date: 2007-01-01
Language: en
Type: book-chapter
Indexed In: ['crossref']
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