Economic analysis of currency pair EUR/USD

This thesis deals with the relationship of exchange rate theory regarding the currency pair EUR / USD. The theoretical part defines the fundamental issue of exchange rates, exchange-rate regimes and the foreign exchange market, where the exchange rates are made. The crucial part of the theory is devoted to economic theories causing currency movements. In conclusion of the theoretical part attention is also given to econometric methods and statistics time series analysis. The analytical part of the thesis examines the short and long term relationships of purchasing power parity, the theory of parity of interest rates and monetary approach to the exchange rate for the currency pair EUR / USD. A regression analysis is used for investigating short-term relationships, and is applied to the relative changes in the value of the currency pair EUR / USD and the changes in the relative values of the theory of exchange rate determination. The long-term equilibrium relationship is analyzed by using a cointegration analysis, specifically the Engle-Granger and Johansen tests. The estimated results are evaluated and discussed in the final part of the thesis