Abstract

This study investigates the impact of the world’s two dominating exchange rates on the exchange rates of selected countries over the last twenty years. Multivariate and recursive co-integration methods are used for the data which includes daily exchange rates for the selected countries from 1990 to 2010.  The findings indicate that (a) the Euro has had a significant long term relationship with the selected countries’ exchange rates before and after current euro crises unlike the US Dollar (b) the US Dollar lost its impact gradually after the introduction of the Euro and got back its impact together with current Euro crises, (c) the Euro shows a more stable relationship with the selected countries’ exchange rates.

Key words:  The US Dollar, Euro, multivariate co-integration, recursive co-integration.