Advanced Search
MyIDEAS: Login to save this article or follow this journal

Macroeconomic Factors and the Balanced Value of the Czech Koruna/Euro Exchange Rate (in English)

Contents:

Author Info

  • Jan Brùha

    ()
    (Czech National Bank, Prague)

  • Alexis Derviz

    ()
    (Czech National Bank, Charles University, and the Institute of Information Theory and Automation, Prague)

Abstract

The authors study the dependence of the Czech koruna’s exchange rate to the euro on risk factors that cannot be reduced to standard macroeconomic fundamentals. For this purpose, they construct an international asset-pricing model in which the exchange rate is codetermined by a risk factor imperfectly correlated with other priced risks in the economy. The model embeds the standard no-arbitrage setup. It also contains an additional equation that links the autarchic currency price with the foreign-exchange order flow. In the state-space form, the unobserved variables that determine the dynamics of the asset markets, the autarchic exchange rate, and the FX order flow span a number of macroeconomic and latent risk factors. The model for the Czech koruna/euro exchange rate uses Kalman filter techniques. The results indicate the existence of a “non-fundamental” source of systematic divergence between the observed and the autarchic (i.e. fundamental) FX returns.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://journal.fsv.cuni.cz/storage/1061_s_318_343.pdf
Download Restriction: no

Bibliographic Info

Article provided by Charles University Prague, Faculty of Social Sciences in its journal Finance a uver - Czech Journal of Economics and Finance.

Volume (Year): 56 (2006)
Issue (Month): 7-8 (July)
Pages: 318-343

as in new window
Handle: RePEc:fau:fauart:v:56:y:2006:i:7-8:p:318-343

Contact details of provider:
Postal: Opletalova 26, CZ-110 00 Prague
Phone: +420 2 222112330
Fax: +420 2 22112304
Email:
Web page: http://ies.fsv.cuni.cz/
More information through EDIRC

Related research

Keywords: exchange rate; latent risk; order flow; pricing kernel; state space;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Derviz, Alexis, 2004. "Asset return dynamics and the FX risk premium in a decentralized dealer market," European Economic Review, Elsevier, vol. 48(4), pages 747-784, August.
  2. Jackwerth, Jens Carsten, 2000. "Recovering Risk Aversion from Option Prices and Realized Returns," Review of Financial Studies, Society for Financial Studies, vol. 13(2), pages 433-51.
  3. Gourieroux,Christian & Monfort,Alain, 1995. "Statistics and Econometric Models," Cambridge Books, Cambridge University Press, number 9780521477451.
  4. Flavin, Thomas & Wickens, Michael R, 2002. "Macroeconomic Influences on Optimal Asset Allocation," CEPR Discussion Papers 3144, C.E.P.R. Discussion Papers.
  5. Andrew Ang & Monika Piazzesi, 2001. "A No-Arbitrage Vector Autoregression of Term Structure Dynamics with Macroeconomic and Latent Variables," NBER Working Papers 8363, National Bureau of Economic Research, Inc.
  6. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
  7. Joshua Rosenberg & Robert F. Engle, 2000. "Empirical Pricing Kernels," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-014, New York University, Leonard N. Stern School of Business-.
  8. Ait-Sahalia, Yacine & Lo, Andrew W., 2000. "Nonparametric risk management and implied risk aversion," Journal of Econometrics, Elsevier, vol. 94(1-2), pages 9-51.
  9. Hua He and David M. Modest., 1992. "Market Frictions and Consumption-Based Asset Pricing," Research Program in Finance Working Papers RPF-223, University of California at Berkeley.
  10. Gourieroux,Christian & Monfort,Alain, 1995. "Statistics and Econometric Models," Cambridge Books, Cambridge University Press, number 9780521405515.
  11. Martin D.D. Evans & Richard K. Lyons, 1999. "Order Flow and Exchange Rate Dynamics," NBER Working Papers 7317, National Bureau of Economic Research, Inc.
  12. Derviz, Alexis, 2004. "Exchange rate risks and asset prices in a small open economy," Working Paper Series 0314, European Central Bank.
  13. Gourinchas, Pierre-Olivier & Tornell, Aaron, 2003. "Exchange Rate Dynamics, Learning and Misperception," CEPR Discussion Papers 3725, C.E.P.R. Discussion Papers.
  14. Hall, Alastair R., 2004. "Generalized Method of Moments," OUP Catalogue, Oxford University Press, number 9780198775201, October.
  15. Gourieroux,Christian & Monfort,Alain, 1995. "Statistics and Econometric Models," Cambridge Books, Cambridge University Press, number 9780521477444.
  16. Gourieroux,Christian & Monfort,Alain, 1995. "Statistics and Econometric Models," Cambridge Books, Cambridge University Press, number 9780521471626.
  17. Smith, Peter N & Wickens, Michael R, 2002. "Macroeconomic Sources of FOREX Risk," CEPR Discussion Papers 3148, C.E.P.R. Discussion Papers.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Luboš Komárek & Martin Motl, 2012. "Behavioural and Fundamental Equilibrium Exchange Rate of the Czech Koruna," Politická ekonomie, University of Economics, Prague, vol. 2012(2), pages 147-166.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fau:fauart:v:56:y:2006:i:7-8:p:318-343. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lenka Herrmannova).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.