Stavarek, Daniel (2013): Cyclical relationship between exchange rates and macro-fundamentals in Central and Eastern Europe.
PDF
MPRA_paper_45323.pdf Download (500kB) |
Abstract
We present empirical evidence on the business cycle relationship between nominal and real effective exchange rate, real GDP, consumption, investment, export, import and general government debt for a group of ten countries from the Central and Eastern Europe. We apply cross-correlation on cyclically filtered and seasonally adjusted quarterly time series over the period 1998-2010. The results are mixed in intensity, direction and cyclicality but show generally weak correlation between exchange rates and fundamentals. Sufficiently high coefficients are found only for government debt and import. We also apply simple regressions to relate the correlation to openness and welfare of the economy. The correlation between exchange rates and macroeconomic aggregates tends to be more pronounced in less open and relatively poorer countries.
Item Type: | MPRA Paper |
---|---|
Original Title: | Cyclical relationship between exchange rates and macro-fundamentals in Central and Eastern Europe |
Language: | English |
Keywords: | business cycle; cross correlation; exchange rate; macroeconomic fundamental; openness; wealth |
Subjects: | E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy F - International Economics > F3 - International Finance > F31 - Foreign Exchange |
Item ID: | 45327 |
Depositing User: | Daniel Stavarek |
Date Deposited: | 21 Mar 2013 12:41 |
Last Modified: | 04 Oct 2019 06:43 |
References: | Cheung, Y.W., Chinn, M.D., Pascual, A.G., (2005), “Empirical exchange rate models of nineties: Are any fit to survive?”, Journal of International Money and Finance, 24(7): 1150-1175. Dedola, L., Leduc, S., (2001), “Why Is the Business Cycle Behaviour of Fundamentals Alike across Exchange Rate Regimes?”, International Journal of Finance & Economics, 6(4): 401-419. De Grauwe, P., Grimaldi, M., (2006), “Exchange Rate Puzzles: A Tale of Switching Attractors”, European Economic Review, 50(1): 1-33. Dornbusch, R., (1976), “Expectations and exchange rate dynamics”, Journal of Political Economy, 84(6): 1161-1176. Duarte, M., Restuccia, D., Waddle, A.L., (2007), “Exchange Rates and Business Cycles across Countries”, Federal Reserve Bank of Richmond Economic Quarterly, 93(1): 57-76. Flood, R.P., Rose, A.K., (1995), “Fixing Exchange Rates a Virtual Quest for Fundamentals”, Journal of Monetary Economics, 36(1): 3-37. Frenkel, J., (1976), “A monetary approach to the exchange rate: doctrinal aspects and empirical evidence”, Scandinavian Journal of Economics, 78(2): 200-224. Hodrick, R.J., Prescott, E.C., (1997), “Postwar US Business Cycles: An Empirical Investigation”, Journal of Money, Credit & Banking, 29(1): 1-16. Lucas, R.E., (1982), “Interest rates and currency prices in a two-country world”, Journal of Monetary Economics, 10(3): 335-359. Obstfeld, M., Rogoff, K.S., (2000), “The six major puzzles in international economics: Is there a common cause?”, in Bernanke, B., Rogoff, K.S. (eds) NBER Macroeconomics Annual 2000, (Cambridge: MIT Press). Rand, J., Tarp, F., (2002), “Business Cycles in Developing Countries: Are They Different?”, World Development, 30(12): 2071-2088. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/45327 |