Productivity Growth and Its Influence on the Dollar/Euro Real Exchange Rate

Olson, Ordean
September 2012
Global Journal of Management & Business Research;2012, Vol. 12 Issue 18, p55
Academic Journal
This paper examines the evidence for a productivity based model of the dollar/euro real exchange rate for the period 1985-2007 period. Cointegrating relationships between the real exchange rate and productivity, real price of oil and government spending are estimated using the Johansen and Stock-Watson procedures. The findings show that for each percentage point in the US-Euro area productivity differential there is a three percentage point change in the real dollar/euro valuation. These findings are robust to the estimation methodology, the variables included in the regression, and the sample period.


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