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Determinants of the Dinar-Euro Nominal Exchange Rate

Author

Listed:
  • Nedeljković, Milan

    (National Bank of Serbia, Belgrade and .Faculty of Economics, Finance and Administration, Singidunum University, Belgrade, Serbia.)

  • Urošević, Branko

    (Faculty of Economics, University of Belgrade and National Bank of Serbia.)

Abstract

This paper studies the drivers of the daily dynamics of the nominal dinar-euro exchange rate from September 2006 to June 2010. Using a novel semiparametric approach we are able to incorporate the evidence of nonlinearities under very weak assumptions on the underlying data generating process. We identify several factors influencing daily exchange rate returns whose importance varies over time. In the period preceding the financial crisis, information in past returns, changes in households’ foreign currency savings and banks' net purchases of foreign currency are the most significant factors. From September 2008 onwards other factors related to changes in country's risk and the information processing in the market gain importance. NBS interventions are found to be effective with a time delay.

Suggested Citation

  • Nedeljković, Milan & Urošević, Branko, 2012. "Determinants of the Dinar-Euro Nominal Exchange Rate," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 121-141, September.
    • Handle: RePEc:rjr:romjef:v::y:2012:i:3:p:121-141
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    References listed on IDEAS

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    Cited by:

    1. Manuel BENAZIC & Ines KERSAN-SKABIC, 2016. "The determinants of exchange rate in Croatia," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 7, pages 125-150, June.

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    More about this item

    Keywords

    foreign exchange market; partially linear model; splines; kernel; Serbia;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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