Nagayasu, Jun (2013): Interdependence in Real Effective Exchange Rates: Evidence from the Dynamic Hierarchical Factor Model.
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Abstract
We analyze and quantify the interdependence of 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 worldwide and two regional factors as well as country-specific elements. Then we provide evidence that a substantial proportion of variation in the exchange rates is country-specific.
Item Type: | MPRA Paper |
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Original Title: | Interdependence in Real Effective Exchange Rates: Evidence from the Dynamic Hierarchical Factor Model |
Language: | English |
Keywords: | Real effective exchange rates, dynamic hierarchical factor model, variance decomposition |
Subjects: | F - International Economics > F3 - International Finance > F31 - Foreign Exchange |
Item ID: | 45955 |
Depositing User: | Nagayasu Jun |
Date Deposited: | 08 Apr 2013 12:56 |
Last Modified: | 28 Sep 2019 20:27 |
References: | Bai, Jushan and Serena Ng, 2004, A PANIC attack on unit roots and cointegration, Econometrica 72(4), 1127-1177. Bai, Jushan and Serena Ng, 2007, Determining the number of primitive shocks in factor models, Journal of Business and Economic Statistics, 25(1), 52-60. Frankel, Jeffrey A. and Shang-Jin Wei, 2008, Estimation of de facto exchange rate regimes: synthesis of techniques for inferring flexibility and basket weights, IMF Staff Papers 55(3), 384-416. MacDonald, Ronald and Mark P. Taylor, 1992, Exchange rate economics: a survey, IMF Staff Papers 39(1), 1-57. McKinnon, Ronald and Gunther Schnabl, 2003, Synchronized business cycles in East Asia and fluctuations in the yen/dollar exchange rate, World Economy 26(8), 1067-1088. Moench, Emanuel, Serena Ng, and Simon Potter, 2011, Dynamic hierarchical factor models, Review of Economics and Statistics, forthcoming. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/45955 |