I want to calculate long time series of forest product prices in current EURO value. Based on international trade prices in USD.
An answer on stack exchange :
http://quant.stackexchange.com/questions/1094/effective-euro-usd-eurusd-exchange-rate-prior-to-euros-existence
suggests using "national currency weights to the ECU value" to obtain a time series back to 1979. It also suggest using a 1979-1999 time series called " Euro Community" from the St Louis FED. Are there other European sources of EUR/USD exchange rate before 1999?
The name euro was officially adopted on 16 December 1995.The euro was introduced to world financial markets as an accounting currency on 1 January 1999, replacing the former European Currency Unit (ECU) at a ratio of 1:1 (EUR/USD 1.1743).
I have a synthetic series (monthly) that goes back to 1980 and uses 97 GDP weights (non-European sourced). It is somewhat different from the ECU series. Let me know if it is of interest and I will e-mail or upload it.
Formally Euro as a Currency came to existence only on 1 Jan 1999, and before that the present member countries had their own independent currencies like the German Mark and the French Franc etc. so strictly speaking there was no Euro/USD exchange rate prior to 1999. But as the earlier answer suggests one can derive this by GDP weights or proportion of trade weights among the countries and the US, for arriving at the Euro/USD rates. But this is subject to assumptions and the accuracy of trade and other data, which are critical to derive the exchange rate.
As I noted, the synthetic euro series uses 1997 GDP weights. If one is trying to put together a series for consistency (using the euro as a unit of account) then I see no issue with the data that I have. If, however, there is implied behavior (say lumber prices are determined in a euro framework) then the approach would make no sense.
@John Ryding I would like to compare your series to the ECU exchange rate provided by the St Louis FED (see my question). Can you please upload it?
I need this data to estimate elasticities of demand for forest products with respect to price and GDP. On a panel dataset of European countries. I would use the international trade price as a proxy for the domestic price.
Previous estimates of these demand functions had been done based on USD prices (in constant USD, calculated using the US GDP deflator) but the exchange rate fluctuations seem to have a large influence on the price. The series is "flatter" if I use ECU (1979-1998) then EURO (1999-2012) prices (in constant EUR of 2010, calculated using a EURO area GDP deflator).
Good question! and related to the monetary policy of the E.U. and its composition history. Perhaps you may need the weighted average returns and the risks of the individual currencies of this region. ( the reason may be to follow a consistent economic policy at least implemented through EU agreements- mainly economic (trade), social, etc). I would suggest the DM, FF, DK, and then maybe grow according to the new EU additions. The ECU was not capturing the characteristics of a real currency at the time, was more an transit financial ccy. Otherwise you should explain this constraint.
Constructed euro data prior to 1999 using 1997 GDP weights for the original countries that joined the euro in January 1999. The data are quarterly back to 1980.
@John Ryding, Thanks for the file, but there are no column headers and I see dates in a strange way. Could you please update it?
Date form is YYQ in the first column and the only data is the euro/$ FX rate (actual from 1999 Q1 onwards, which would be the 991 date).
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