The Unpredictable Dollar-Euro Exchange Rate

The rate at which dollars are exchanged for euros impacts our daily lives. So, it’s no surprise that this and other currency fluctuations are studied and debated. What could be called the “classical approach” attributes changes in the exchange rate to changes in GDP and other such variables. Yet, Meese and Rogoff overturned this theory in 1983 by showing that exchange rate changes are unpredictable. In the paper “Estudio de la tasa de cambio d�lar-euro” (“Study of the Dollar-Euro Exchange Rate”), IESE Professor Miguel Ángel Ariño and Miguel Ángel Canela of the University of Barcelona follow up on the latest developments in the field. Their study of short and long-term changes in the dollar/euro exchange rate does not predict future changes, but it does offer some insights into turning points and volatility.

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