Co-movements in Real Effective Exchange Rates : Evidence From the Dynamic Hierarchical Factor Model
Nagayasu, Jun (2013) Co-movements in Real Effective Exchange Rates : Evidence From the Dynamic Hierarchical Factor Model. Discussion paper. University of Strathclyde, Glasgow.
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Abstract
We analyze and quantify co-movements in real effective exchange rates while considering the regional location of countries. More specifically, using the dynamic hierarchical factor model (Moench et al. (2011)), we decompose exchange rate movements into several latent components; worldwide and two regional factors as well as country-specific elements. Then, we provide evidence that the worldwide common factor is closely related to monetary policies in large advanced countries while regional common factors tend to be captured by those in the rest of the countries in a region. However, a substantial proportion of the variation in the real exchange rates is reported to be country-specific; even in Europe country-specific movements exceed worldwide and regional common factors.
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Item type: Monograph(Discussion paper) ID code: 68093 Dates: DateEvent2013PublishedNotes: Published as a paper within the Discussion Papers in Economics, No. 13-18 (2013) Subjects: Social Sciences > Economic Theory Department: Strathclyde Business School > Economics Depositing user: Pure Administrator Date deposited: 29 May 2019 10:21 Last modified: 18 Sep 2024 00:57 URI: https://strathprints.strath.ac.uk/id/eprint/68093