Global Exchange Rates Linked to Common Trends, Impacting Economic Stability
The article examines how different countries' economies affect exchange rates by analyzing data from 19 OECD countries between 1973 and 2007. By using a method called principal component analysis, the researchers separated common trends from individual country-specific factors. They discovered that international trends play a significant role in the relationship between exchange rates and economic fundamentals. The study also found that income and money have a strong impact on exchange rates, supporting the monetary model's predictions.