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Drivers of exchange rate dynamics in selected CIS countries: Evidence from a FAVAR analysis

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  • Christian Dreger

    ()

  • Jarko Fidrmuc

    ()
    (Osteuropa-Institut, Regensburg (Institut for East European Studies))

Abstract

We investigate the likely sources of exchange rate dynamics in selected CIS countries (Russia, Kazakhstan, Ukraine, Kyrgyzstan, Azerbaijan, and Moldova) over the last dec-ade (1999-2010). Evidence is based on country VARs augmented by a regional com-mon factor structure (FAVAR model). The models include nominal exchange rates, the common factor of exchange rates in the CIS countries, and international drivers such as global trade, share prices, and oil price. Global, regional and idiosyncratic shocks are identified in a standard Cholesky fashion. Their relevance for exchange rates is ex-plored by a decomposition of the variance of forecast errors. The impact of global shocks to in the developments of exchange rates has increased, in particular, if financial shocks are considered. Because of the financial crisis, regional shocks have become more important at the expense of global shocks.

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Bibliographic Info

Paper provided by Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies) in its series Working Papers with number 289.

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Length: 12
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:ost:wpaper:289

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Keywords: Exchange rates; CIS countries; financial crisis; FAVAR models;

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  1. Fidrmuc, Jan & Fidrmuc, Jarko, 2000. "Disintegration and Trade," CEPR Discussion Papers 2641, C.E.P.R. Discussion Papers.
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Cited by:
  1. Fidrmuc, Jarko & Süß, Philipp Johann, 2009. "The Outbreak of the Russian Banking Crisis," Discussion Papers in Economics 10996, University of Munich, Department of Economics.

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