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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.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/0960310042000243538
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Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 14 (2004)
Issue (Month): 10 ()
Pages: 697-705

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Handle: RePEc:taf:apfiec:v:14:y:2004:i:10:p:697-705
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  1. Reinhart, Carmen & Calvo, Guillermo & Vegh, Carlos, 1994. "Targeting the real exchange rate," MPRA Paper 13765, University Library of Munich, Germany.
  2. Clarida, Richard & Galí, Jordi, 1994. "Sources of Real Exchange Rate Fluctuations: How Important are Nominal Shocks?," CEPR Discussion Papers 951, C.E.P.R. Discussion Papers.
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  9. Osakwe, Patrick N. & Schembri, Lawrence L., 2002. "Real effects of collapsing exchange rate regimes: an application to Mexico," Journal of International Economics, Elsevier, vol. 57(2), pages 299-325, August.
  10. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1998. "Can sticky price models generate volatile and persistent real exchange rates?," Staff Report 223, Federal Reserve Bank of Minneapolis.
  11. Jorge Roldos & Alexander W. Hoffmaister, 1996. "The Sources of Macroeconomic Fluctuations in Developing Countries; Brazil and Korea," IMF Working Papers 96/20, International Monetary Fund.
  12. 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.
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  14. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
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  16. Hinkle, Lawrence E. & Monteil, Peter J. (ed.), 1999. "Exchange Rate Misalignment: Concepts and Measurement for Developing Countries," OUP Catalogue, Oxford University Press, number 9780195211269, June.
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