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Sources of Real Exchange Rate Fluctuations in the Nordic Countries

Author

Listed:
  • Alexius, Annika

    (Monetary Policy Department, Central Bank of Sweden)

Abstract

In an attempt to move beyond the purchasing power parity hypothesis, this paper studies two issues. First, the causes of movements of real exchange rates are investigated. In contrast to the typical result, supply shocks are found to dominate the long-run variance decompositions for all countries. This suggests that productivity developments are the most important determinant of long-run movements in real exchange rate. A second topic is the relative importance of stationary and non-stationary components of real exchange rates. Also in contrast to previous findings, transitory shocks are more important than permanent shocks for three of the four countries.

Suggested Citation

  • Alexius, Annika, 1999. "Sources of Real Exchange Rate Fluctuations in the Nordic Countries," Working Paper Series 90, Sveriges Riksbank (Central Bank of Sweden).
  • Handle: RePEc:hhs:rbnkwp:0090
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    File URL: http://www.riksbank.com/upload/3524/WP_90.pdf
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    Citations

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    Cited by:

    1. Lindblad, Hans & Sellin, Peter, 2003. "The Equilibrium Rate of Unemployment and the Real Exchange Rate: An Unobserved Components System Approach," Working Paper Series 152, Sveriges Riksbank (Central Bank of Sweden).
    2. John R. Baldwin & Beiling Yan, 2007. "Exchange Rate Cycles and Canada/US Manufacturing Prices," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(3), pages 508-533, October.
    3. Bergvall, Anders, 2000. "Exchange Rate Regimes and Macroeconomic Stability: The Case of Sweden 1972-1996," Working Paper Series 2000:25, Uppsala University, Department of Economics.
    4. Anna Larsson, 2004. "The Swedish real exchange rate under different currency regimes," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 140(4), pages 706-727, December.
    5. Alexius, Annika, 2001. "How to Beat the Random Walk," Working Paper Series 175, Trade Union Institute for Economic Research.
    6. Jaanus Raim, 2004. "The Alternative to the Existing System of the Concepts about Purchasing Power Parity Deviations . Derived from the Estonian Experience," Working Papers 115, Tallinn School of Economics and Business Administration, Tallinn University of Technology.
    7. Annika Alexius & Mikael Carlsson, 2005. "Measures of Technology and the Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 299-307, May.
    8. Anders Bergvall, 2004. "What Determines Real Exchange Rates? The Nordic Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 315-337, June.
    9. Hilde C Bjørnland & Håvard Hungnes, 2008. "The Commodity Currency Puzzle," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(2), pages 7-30, May.
    10. Baldwin, John R. & Yan, Beiling, 2006. "Les mouvements cycliques du taux de change et les prix dans les secteurs canadien et americain de la fabrication," Serie de documents de recherche sur l'analyse economique (AE) 2006041f, Statistics Canada, Direction des etudes analytiques.
    11. Alexius, Annika, 2000. "Supply Shocks and Real Exchange Rates," Working Paper Series 117, Sveriges Riksbank (Central Bank of Sweden).
    12. Lindblad, Hans & Sellin, Peter, 2006. "A Simultaneous Model of the Swedish Krona, the US Dollar and the Euro," Working Paper Series 193, Sveriges Riksbank (Central Bank of Sweden).

    More about this item

    Keywords

    Real exchange rate; Purchasing power parity; Nordic countries;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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