What happens when the Kiwi flies? The sectoral effects of the exchange rate shocks
We estimate a Factor Augmented Vector autoregression (FAVAR) to identify idiosyncratic exchange rate shocks and examine the effects of these shocks on different sectors of the economy. We find that an unexpected shock to the exchange rate has significant effects on the tradable sector of the economy. While this is expected, the nontradable sectors of the economy are also influenced by shocks to exchange rate. We argue that one important channel for this influence is the endogenous/cyclical nature of the population dynamics due to permanent and long term migration.
|Date of creation:||Nov 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Crawford Building, Lennox Crossing, Building #132, Canberra ACT 2601|
Phone: +61 2 6125 4705
Fax: +61 2 6125 5448
Web page: http://cama.crawford.anu.edu.au
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Haroon Mumtaz & Paolo Surico, 2009. "The Transmission of International Shocks: A Factor-Augmented VAR Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(s1), pages 71-100, 02.
- Mumtaz, Haroon & Sunder-Plassmann, Laura, 2010. "Time-varying dynamics of the real exchange rate. A structural VAR analysis," Bank of England working papers 382, Bank of England.
- Richard Fabling & Lynda Sanderson, 2013.
"Export performance, invoice currency, and heterogeneous exchange rate pass-through,"
Treasury Working Paper Series
13/03, New Zealand Treasury.
- Richard Fabling & Lynda Sanderson, 2015. "Export Performance, Invoice Currency and Heterogeneous Exchange Rate Pass-through," The World Economy, Wiley Blackwell, vol. 38(2), pages 315-339, 02.
- Richard Fabling & Lynda Sanderson, 2013. "Export performance, invoice currency, and heterogeneous exchange rate pass-through," Reserve Bank of New Zealand Discussion Paper Series DP2013/01, Reserve Bank of New Zealand.
- Richard Fabling & Lynda Sanderson, 2013. "Export Performance, Invoice Currency, and Heterogeneous Exchange Rate Pass-Through," Working Papers 13_01, Motu Economic and Public Policy Research.
- Buckle, Robert A. & Kim, Kunhong & Kirkham, Heather & McLellan, Nathan & Sharma, Jarad, 2007. "A structural VAR business cycle model for a volatile small open economy," Economic Modelling, Elsevier, vol. 24(6), pages 990-1017, November.
- Farrant, Katie & Peersman, Gert, 2006.
"Is the Exchange Rate a Shock Absorber or a Source of Shocks? New Empirical Evidence,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 38(4), pages 939-961, June.
- K. Farrant & G. Peersman, 2005. "Is the exchange rate a shock absorber or a source of shocks? New empirical evidence," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 05/285, Ghent University, Faculty of Economics and Business Administration.
- Emmanuel De Veirman & Ashley Dunstan, 2011.
"Time-varying returns, intertemporal substitution and cyclical variation in consumption,"
Reserve Bank of New Zealand Discussion Paper Series
DP2011/05, Reserve Bank of New Zealand.
- De Veirman Emmanuel & Dunstan Ashley, 2011. "Time-Varying Returns, Intertemporal Substitution and Cyclical Variation in Consumption," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-41, July.
- Emmanuel De Veirman & Ashley Dunstan, 2011. "Time-Varying Returns, Intertemporal Substitution and Cyclical Variation in Consumption," CAMA Working Papers 2011-14, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Alfred A Haug & Christie Smith, 2007.
"Local linear impulse responses for a small open economy,"
Reserve Bank of New Zealand Discussion Paper Series
DP2007/09, Reserve Bank of New Zealand.
- Alfred A. Haug & Christie Smith, 2012. "Local Linear Impulse Responses for a Small Open Economy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(3), pages 470-492, 06.
- Alfred A. Haug & Christie Smith, 2007. "Local linear impulse responses for a small open economy," Working Papers 0707, University of Otago, Department of Economics, revised Apr 2007.
- Brosnan, Peter & Poot, Jacques, 1987. "Modelling the Determinants of Trans-Tasman Migration after World War II," The Economic Record, The Economic Society of Australia, vol. 63(183), pages 313-29, December.
- Jushan Bai & Serena Ng, 2002.
"Determining the Number of Factors in Approximate Factor Models,"
Econometric Society, vol. 70(1), pages 191-221, January.
- Tom Doan, . "BAING: RATS procedure to estimate factors in a factor model using Bai-Ng formulas," Statistical Software Components RTS00012, Boston College Department of Economics.
- Jushan Bai & Serena Ng, 2000. "Determining the Number of Factors in Approximate Factor Models," Boston College Working Papers in Economics 440, Boston College Department of Economics.
- Jushan Bai & Serena Ng, 2000. "Determining the Number of Factors in Approximate Factor Models," Econometric Society World Congress 2000 Contributed Papers 1504, Econometric Society.
- Hahn, Elke, 2007. "The impact of exchange rate shocks on sectoral activity and prices in the euro area," Working Paper Series 0796, European Central Bank.
When requesting a correction, please mention this item's handle: RePEc:een:camaaa:2013-73. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Cama Admin)
If references are entirely missing, you can add them using this form.