Dissecting Exchange Rates and Fundamentals in the Modern Floating Era: The Role of Permanent and Transitory Shocks

研究成果: 雜誌貢獻文章

摘要

In this paper, we apply a permanent–transitory decomposition method to analyze the link between nominal exchange rates and fundamentals in the modern floating era. The results suggest that transitory shocks dominate nominal exchange rate fluctuations, while permanent shocks dominate the variations in fundamentals. Therefore, the findings suggest that the nominal exchange rate should not be approximated by a pure random walk. Moreover, we find that unobserved fundamentals in the Taylor rule model can explain the transitory components in exchange rates.

原文英語
頁(從 - 到)165-194
頁數30
期刊Review of International Economics
25
發行號1
DOIs
出版狀態已發佈 - 2017 二月 1

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development

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