Third Country Effects of the European Union on the Monetary Model of Exchange Rate News
Type of DegreeThesis
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This thesis investigates third country effects in the monetary model of exchange rate news. The goal of this thesis is to determine whether the country chosen as the third country makes a difference. US variables as the third country in the monetary model of exchange rate news have been shown to have a significant effect on the model. This thesis examines whether the European Union has had a similar effect on the pound-sterling/dollar and yen/dollar exchange rates. This hypothesis is empirically tested by adding EU macroeconomic variables to the monetary model of exchange rate news. The EU does not affect the pound sterling/dollar and yen/dollar exchange rates, leading to the conclusion that the country chosen as the third country in the monetary model of exchange rate news affects model estimation.