The dollar–euro exchange rate and monetary fundamentals

Macroeconomic Fundamentals and the DM/$ Exchange Rate: Imperfect Knowledge and the Monetary Model

Despite the volumes written on the failure of empirical exchange rate models, there is a key feature of the record that is much overlooked, namely there are some subperiods of floating rates during which macroeconomic models provide reasonable explanations of monthly or quarterly exchange rate movements and other subperiods during which the explanatory power of these models completely disappear...

Monetary Policy, Exchange Rate Flexibility, and Exchange Rate Pass-Through

This paper develops a dynamic general-equilibrium (DGE) model of a small open economy to investigate alternative monetary rules, differing primarily in the degree to which they allow for exchange rate flexibility. A central argument of the paper is that the nature of the trade-off between fixed and floating exchange rates may be quite different in mature industrial economies than in emerging-ma...

The Contribution of Observed and Unobserved Fundamentals to Exchange Rate Movements in Iran

Using a State-space model, this paper investigates the contribution of both observed and unobserved fundamentals to nominal exchange rate movement in Iran for the period 1991:2-2011:4. To this end, we follow Engel and West (2005) and Balke et al. (2013) and use an asset-pricing approach to develop a rational expectations present value exchange rate model. In order to examine the role of fun...

The Impact of Monetary Regime on the Exchange Rate Pass-Through under Exchange Rate Volatility (Dynamic Panel Data Approach)

How Well Do Monetary Fundamentals Forecast Exchange Rates?

For many years after the seminal work of the Meese and Rogoff (1983a), conventional wisdom held that exchange rates could not be forecast from monetary fundamentals. Monetary models of exchange rate determination were generally unable to beat even a naïve no-change model in out-of-sample forecasting. More recently, the use of sophisticated econometric techniques, panel data, and long spans of d...