Explaining the Dollar-Euro rate : do stock market returns matter?
- This paper investigates how US and European equity markets affected the US dollar-euro rate from the introduction of the euro through April 2001. More detailed the following questions are raised: First, do movements in the stock market help to explain movements in the exchange rate? Second, how large is the impact of stock market returns on the exchange rate? And third, does the exchange rate respond differently to different equity markets? The investigation was carried out using daily data within a vector-autoregression model (VAR). Surprisingly, positive returns on US equities as well as on European stock markets had a negative impact on the US dollar-euro rate. Quantitatively, the US dollar-euro rate seems to be more influenced by European stock markets compared to US stock markets. Further, there is evidence for a somewhat weaker impact of technology stock indices on the US dollar-euro rate compared with broader market indices. Finally, the long-term interest rate differential seems to contain more information about exchange rate movements than the short-term interest rate differential. This Version: August, 2001. Klassifikation: C32, F31
Author: | Bernd Kaltenhäuser |
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URN: | urn:nbn:de:hebis:30-9831 |
Parent Title (German): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2001,06 |
Series (Serial Number): | CFS working paper series (2001, 06) |
Document Type: | Working Paper |
Language: | English |
Year of Completion: | 2001 |
Year of first Publication: | 2001 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2005/06/13 |
Tag: | Exchange Rates; Information Share |
GND Keyword: | USA; Europäische Union; Wechselkurs; Börsenkurs; Kapitalertrag; Kapitalgewinn; Zinsparität; Aktienmarkt; Kapitalmarkteffizienz; Schätzung; Geschichte 1999-2001 |
Issue: | Version: August 2001 |
Page Number: | 37 |
HeBIS-PPN: | 201549808 |
Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Licence (German): | Deutsches Urheberrecht |