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Local, global and regional shocks indices in emerging exchange rate markets

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  • Erdem, F. Pinar
  • Geyikci, Utku Bora

Abstract

Impact of exchange rate shocks on emerging market economies have been studied extensively; however, what is the origin of those shocks remains unanswered in the literature. The main aim of this paper is to fill this gap. We identify local, regional and global shocks in exchange rate markets for 19 major EMEs on a daily basis by using forward rate unbiasedness hypothesis. We find an asymmetry on the effects of both local and global shocks and also show that depreciating effects of both local and global shocks dominate the appreciating effects for almost all countries sampled. Moreover, we find that the external vulnerability indicators and financial development indicators are the main sources of the level of shocks.

Suggested Citation

  • Erdem, F. Pinar & Geyikci, Utku Bora, 2021. "Local, global and regional shocks indices in emerging exchange rate markets," International Review of Economics & Finance, Elsevier, vol. 73(C), pages 98-113.
    • Handle: RePEc:eee:reveco:v:73:y:2021:i:c:p:98-113
    DOI: 10.1016/j.iref.2020.12.039
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    2. Adrian Marek Burda, 2022. "How Well Do Contemporary Theories Explain Floating Exchange Rate Changes in an Emerging Economy: The Case of EUR/PLN," Economies, MDPI, vol. 10(11), pages 1-20, November.

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    More about this item

    Keywords

    Forward unbiasedness hypothesis; Exchange rates; Emerging market economies;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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