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Research Brief

Exchange Rate Dynamics

The Relationship Between Danish Inflation and Relative Exchange Rates (Applied Data Analysis).

This project is a descriptive and exploratory analysis of currency co-movements. It focuses on data construction and visualization rather than causal inference, serving as an early exercise in applied macro-data handling.

Executive Summary

This project investigates the long-run relationship between Danish inflation and nominal exchange rates for the EUR, USD, and CNY. By merging annual consumer price indices with exchange rate series from Statistics Denmark, the analysis explores how different currency regimes and global economic shifts reflect in relative price levels. The focus is on robust data cleaning, period-specific indexing, and comparative visualization across major trading partners.

Research Questions

01

How have the nominal exchange rates of EUR, USD, and CNY evolved relative to the Danish Krone over the last two decades?

02

Is there a visible co-movement between domestic inflation and changes in the relative values of these major currencies?

03

How do the dynamics differ between the pegged EUR regime and more volatile currencies like the USD and CNY?

Data & Methodology

Model Framework

Descriptive comparative analysis and period-indexed trend tracking.

Identification Strategy

Data merging from multiple Statistics Denmark (DST) tables (inflation vs. exchange rates).

Data & Frequency

Annual frequency data covering major currencies and Danish CPI.

Estimation Approach

Baseline indexing and relative change calculations (year-over-year).

[ Transmission Pathway Diagram: Model Architecture ]

Key Observations

  • Pegged Stability: The DKK/EUR rate exhibits minimal variance, reflecting the success of the fixed exchange rate policy.

  • Global Volatility: Significant swings in USD and CNY rates correlate loosely with global commodity price shifts rather than local inflation shocks.

  • Decomposed Trends: Long-run trends suggests that while inflation is stable, exchange rate volatility is primarily driven by external macroeconomic factors.

  • Data Coherence: The project demonstrates that merged indices from DST provide a consistent framework for multi-currency comparison.

Data & Tools

Sources

Statistics Denmark (DST) via API/Bulk download.

Software

Python (Pandas for data cleaning, Matplotlib/Seaborn for visualization).

Documentation

Download Thesis (PDF) Full Text • 2.4 MB
Suggested Reference
Jørgensen, A. M. E. (2023). Exchange Rate Dynamics: Inflation and Relative Rates in Denmark. Applied Data Analysis Project. Ref: ADA-2023-DK.

Why this matters

Highlights the importance of exchange rate stability for a small open economy like Denmark.

Provides a descriptive baseline for understanding how imported inflation might be transmitted through currency channels.

Demonstrates the practical utility of public data APIs (DST) for policy-relevant monitoring.

Cite this work

@misc{exchange_2026,
  author = {Jørgensen, A. M. E.},
  title = {Exchange Rate Dynamics},
  year = {2026},
  url = {https://antonebsen.dk/projects/exchange-rate-dynamics}
}
Jørgensen, A. M. E. (2023). Exchange Rate Dynamics: Inflation and Relative Rates in Denmark. Applied Data Analysis Project. Ref: ADA-2023-DK.