Drivers of Exchange Rate Dynamics in Selected CIS Countries: Evidence from a FAVAR Analysis
AbstractWe investigate the likely sources of exchange rate dynamics in selected CIS countries (Russia, Kazakhstan, Ukraine, Kyrgyzstan, Azerbaijan, and Moldova) over the past decade (1999-2008). The analysis is based on country VAR models augmented by a regional common factor structure (FAVAR model). The models include nominal exchange rates, the common factor of exchange rates in the CIS countries, and global drivers such as gold, oil and share prices. Global, regional and idiosyncratic shocks are identified in a standard Cholesky fashion. Based on the decomposition of the variance of forecast errors, their relevance for exchange rates is explored. As a quite robust finding, CIS exchange rates have become more vulnerable to global shocks towards the end of the sample.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 867.
Length: 14 p.
Date of creation: 2009
Date of revision:
Publication status: Published in: Emerging Markets Finance & Trade 47 (2011) No.4, 49-58
Exchange rates; CIS countries; financial crisis; FAVAR models;
Other versions of this item:
- Christian Dreger & Jarko Fidrmuc, 2010. "Drivers of exchange rate dynamics in selected CIS countries: Evidence from a FAVAR analysis," Working Papers 289, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
- F31 - International Economics - - International Finance - - - Foreign Exchange
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-28 (All new papers)
- NEP-CBA-2009-03-28 (Central Banking)
- NEP-CIS-2009-03-28 (Confederation of Independent States)
- NEP-IFN-2009-03-28 (International Finance)
- NEP-TRA-2009-03-28 (Transition Economics)
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