THE DOLLAR/EURO EXCHANGE RATE AND A COMPARISON OF MAJOR MODELS

Author:

Hsing Yu1,Sergi Bruno S.2

Affiliation:

1. Southeastern Louisiana University, Hammond, Louisiana 70402, USA

2. University of Messina, DESMaS “V. Pareto”, Via T. Cannizzaro, 278 98122 Messina, Italy

Abstract

This article analyzes the behaviour of the USD/EUR exchange rate based on four major models. Using the mean absolute percent error (MAPE) as a criterion, the extended Mundell‐Fleming model performs best, followed by the PPP model using the relative PPI, the monetary model, the PPP model using the relative CPI, and the UIP model. The widely used log‐log form in the PPP model based on the relative PPI or CPI can be rejected at the 5% level. The insignificant coefficients or unexpected signs of some variables in the monetary and other models may pose some challenges in applications.

Publisher

Vilnius Gediminas Technical University

Subject

Economics and Econometrics,Business, Management and Accounting (miscellaneous)

Cited by 7 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

1. Editorial: Yu Hsing: in memoriam;Journal of Financial Economic Policy;2023-05-16

2. The Impact of a Political Shock on Foreign Exchange Markets in Small Open Economy: A Dynamic Modeling Approach;SSRN Electronic Journal;2022

3. Exchange Rates in South America's Emerging Markets;2020-06-22

4. Macro Determinants of Real Exchange Rates: Albanian Case;The 21st Century from the Positions of Modern Science: Intellectual, Digital and Innovative Aspects;2019-11-03

5. Forecasting Errors, Directional Accuracy and Profitability of Currency Trading: The Case of EUR/USD Exchange Rate;Journal of Forecasting;2016-03-10

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