Warwick Business School Financial Econometrics Research Centre
Abstract
This paper presents a simultaneous model of exchange rates
between the three major countries. In addition to incorporating long-run
equilibria and short-run dynamics, the model is designed to capture
complex interactions between currencies not normally considered in
exchange rate models. These interactions are shown to be important via
generalised impulse response analysis, and the model as a whole to be
an economically and statistically superior forecasting tool over relatively
short horizons
