Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/41579 
Authors: 
Year of Publication: 
2009
Series/Report no.: 
cege Discussion Papers No. 89
Publisher: 
University of Göttingen, Center for European, Governance and Economic Development Research (cege), Göttingen
Abstract: 
The aim of this paper is to discuss excess comovements for the Euro/US dollar and British pound/US dollar exchange rates, i.e. we look for comovements of exchange rates which are stronger than implied by fundamentals. The results of the empirical analysis give evidence that excess comovements indeed exist. A long-run analysis on correlations can verify that the correlations dynamics of exchange rates, relative inflation rates, long-term interest rates, economic sentiments and money supply are linked. We found that money supply and prices play major roles. From the investigation of our exchange rate pair it becomes obvious that non-fundamental factors in exchange rates have an important meaning for modelling foreign exchange rates.
Subjects: 
Foreign Exchange Market
DCC-GARCH
Excess Comovements
JEL: 
E44
F31
G15
Document Type: 
Working Paper

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