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Determinants of the Dinar-Euro Nominal Exchange Rate

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Listed author(s):
  • Milan Nedeljkovic

    (National Bank of Serbia)

  • Branko Urosevic

    (National Bank of Serbia)

Registered author(s):

    Abstract

    This paper studies drivers of daily dynamics of the nominal dinar-euro exchange rate from September 2006 to June 2010. Using a novel semiparametric approach we are able to incorporate the evidence of nonlinearities under very weak assumptions on the underlying data generating process. We identify several factors influencing daily exchange rate returns whose importance varies over time. In the period preceeding the financial crisis, information in past returns, changes in households’ foreign currency savings and banks' net purchases of foreign currency are the most significant factors. From September 2008 onwards other factors related to changes in country's risk and the information processing in the market gain importance. NBS interventions are found to be effective with a time delay.

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    File URL: http://www.nbs.rs/internet/english/90/90_0/2011_18_MN_BU_e.pdf
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    Paper provided by National Bank of Serbia in its series Working papers with number 18.

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    Length: 20 pages
    Date of creation: May 2011
    Handle: RePEc:nsb:wpaper:18
    Contact details of provider: Postal:
    National Bank of Serbia, 12 Kralja Petra St, 11 000 Belgrade, Republic of Serbia

    Phone: 381-11/3248-841
    Fax: 381-11/3234-120
    Web page: http://www.nbs.rs
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    Keywords: Foreign exchange market; Partially linear model; Kernel estimation;

    Find related papers by JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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