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Sources of exchange rate fluctuations: empirical evidence from six emerging market countries


  • Ibrahim Chowdhury


This paper investigates sources of fluctuations in real and nominal US dollar exchange rates of selected emerging market economies by decomposing the exchange rate series into stochastic components induced by real and nominal factors. The dynamic effects and relative importance of real and nominal shocks in explaining the behaviour of these exchange rates are analysed. The results indicate that real shocks dominate nominal shocks for the exchange rate series examined. In turn, these findings have important economic implications.

Suggested Citation

  • Ibrahim Chowdhury, 2004. "Sources of exchange rate fluctuations: empirical evidence from six emerging market countries," Applied Financial Economics, Taylor & Francis Journals, vol. 14(10), pages 697-705.
  • Handle: RePEc:taf:apfiec:v:14:y:2004:i:10:p:697-705 DOI: 10.1080/0960310042000243538

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    References listed on IDEAS

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    9. Clarida, Richard & Gali, Jordi, 1994. "Sources of real exchange-rate fluctuations: How important are nominal shocks?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 41(1), pages 1-56, December.
    10. Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel, 1999. "What caused the Asian currency and financial crisis?," Japan and the World Economy, Elsevier, vol. 11(3), pages 305-373, October.
    11. Dibooglu, Selahattin & Kutan, Ali M., 2001. "Sources of Real Exchange Rate Fluctuations in Transition Economies: The Case of Poland and Hungary," Journal of Comparative Economics, Elsevier, vol. 29(2), pages 257-275, June.
    12. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    13. Martin D. D. Evans & James R. Lothian, 2017. "The Response of Exchange Rates to Permanent and Transitory Shocks under Floating Exchange Rates," World Scientific Book Chapters,in: Studies in Foreign Exchange Economics, chapter 1, pages 3-38 World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Caporale, Guglielmo Maria & Ciferri, Davide & Girardi, Alessandro, 2011. "Fiscal shocks and real exchange rate dynamics: Some evidence for Latin America," Journal of International Money and Finance, Elsevier, vol. 30(5), pages 709-723, September.
    2. Takeshi Inoue & Shigeyuki Hamori, 2009. "What Explains Real and Nominal Exchange Rate Fluctuations?: Evidence from SVAR Analysis for India," Economics Bulletin, AccessEcon, vol. 29(4), pages 2803-2815.
    3. Kuzmin, Anton, 1971. "A Structural Model of Exchange Rate Dynamics," MPRA Paper 64614, University Library of Munich, Germany.
    4. Imed Drine & Christophe Rault, 2009. "Une analyse économétrique des sources de fluctuations du taux de change réel dans trois pays en développement. Le cas du Maroc, des Philippines et de l'Uruguay," Revue économique, Presses de Sciences-Po, vol. 60(6), pages 1421-1453.
    5. K. Rajmund MIRDALA, 2012. "Sources Of Exchange Rate Volatility In The European Transition Economies. Effects Of Economic Crisis Revealed," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 7(3(21)/ Fa), pages 270-282.
    6. Guglielmo Maria Caporale & Thouraya Hadj Amor & Christophe Rault, 2011. "Sources of Real Exchange Rate Volatility and International Financial Integration: A Dynamic GMM Panel Approach," CESifo Working Paper Series 3645, CESifo Group Munich.
    7. Agnieszka Stazka, 2006. "Sources of Real Exchange Rate Fluctuations in Central and Eastern Europe – Temporary or Permanent?," CESifo Working Paper Series 1876, CESifo Group Munich.
    8. Chatterjee, Santanu & Mursagulov, Azer, 2016. "Fiscal Policy And The Real Exchange Rate," Macroeconomic Dynamics, Cambridge University Press, vol. 20(07), pages 1742-1770, October.
    9. repec:wsi:serxxx:v:55:y:2010:i:04:n:s0217590810004012 is not listed on IDEAS
    10. Seiha Ok & Makoto Kakinaka & Hiroaki Miyamoto, 2010. "Real Shock Or Nominal Shock? Exchange Rate Movements In Cambodia And Lao Pdr," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 55(04), pages 685-703.
    11. Le Thanh, Binh, 2015. "The source of real and nominal exchange rate fluctuations in Thailand: Real shock or nominal shock," MPRA Paper 66322, University Library of Munich, Germany.

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