Report
Four exchange rate models: Which one seems to explain the dollar/euro exchange rate?
We start from four standard theoretical exchange rate models: The purchasing power parity model : the country's exchange rate depreciates when its inflation is higher than that of competing countries; The equilibrium real exchange rate model: the exchange rate depreciates in the short term when the country has excess savings (an external surplus); in the long term when the country has large external debt; The external equilibrium model: the exchange rate brings the current account back into equilibrium; The capital flow model, where the exchange rate depends on the interest rate differential between countries. When we try to apply these four models to the dollar/euro exchange rate, we see that the following are in line with the facts: The short-term equilibrium real exchange rate model; The capital flow model.
Provider
Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
Other Reports from Natixis
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.