Exchange Rates as Exchange Rate Common Factors
AbstractFactor analysis performed on a panel of 23 nominal exchange rates from January 1999 to December 2010 yields three common factors. This paper identifies the euro/dollar, Swiss- franc/dollar and yen/dollar exchange rates as empirical counterparts to these common factors. These empirical factors explain a large proportion of exchange rate variation over time and have significant in-sample and out-of-sample predictive power.
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Bibliographic InfoPaper provided by University of Notre Dame, Department of Economics in its series Working Papers with number 011.
Length: 29 pages
Date of creation: Mar 2012
Date of revision: Mar 2012
Exchange Rates; Common Factors; Forecasting;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-11 (All new papers)
- NEP-FOR-2012-11-11 (Forecasting)
- NEP-MON-2012-11-11 (Monetary Economics)
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- Felício, Wilson Rafael de Oliveira & Rossi, José Luiz Júnior, 2013. "Common factors and the exchange rate: results from the Brazilian case," Insper Working Papers wpe_318, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
- Rossi, José Luiz Júnior, 2013. "Liquidity and Exchange Rates," Insper Working Papers wpe_325, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
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