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| Author: | Schnatz, B. Vijselaar, F. Osbat, C. |
| Title: | Productivity and the euro-dollar exchange rate |
| Journal: | Review of World Economics
2004 : VOL. 140:1, p. 1-30 |
| Index terms: | Currency Exchange rates Integration Labour Productivity Models USA |
| Language: | eng |
| Abstract: | The article analyzes the impact of productivity developments in the United States and the euro area on the euro-dollar exchange rate. The article presents a new measure of relative average labour productivity (ALP) which does not suffer from the biases implicit in readily available relative ALP data. Importantly, the patterns of these series differ widely. Employing the Johansen cointegration framework, four models are estimated using four different productivity proxies. The results indicate that the extent to which productivity can explain the euro depreciation varies with the productivity proxy used: readily available measures explain most, the new of ours, preferred measure least. In all models, however, productivity can explain only a fraction of the actual euro depreciation experienced in 1999-2000. |
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