Interdependence in Real Effective Exchange Rates: Evidence from the Dynamic Hierarchical Factor Model
AbstractWe analyze and quantify the interdependence of real effective exchange rates while considering the regional location of countries. More specifically, using the dynamic hierarchical factor model (Moench et al 2011), we decompose exchange rate movements into worldwide and two regional factors as well as country-specific elements. Then we provide evidence that a substantial proportion of variation in the exchange rates is country-specific.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 45955.
Date of creation: Apr 2013
Date of revision:
Real effective exchange rates; dynamic hierarchical factor model; variance decomposition;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
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