Interdependence in Real Effective Exchange Rates: Evidence from the Dynamic Hierarchical Factor Model

We analyze and quantify the interdependence of real effective exchange rates while considering the regional location of countries. More specifically, using the dynamic hierarchical factor model (Moench et al 2011), we decompose exchange rate movements into worldwide and two regional factors as well as country-specific elements. Then we provide evidence that a substantial proportion of variation in the exchange rates is country-specific.

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Year of publication:	2013-04
Authors:	Nagayasu, Jun
Institutions:	Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München
Subject:	Real effective exchange rates \| dynamic hierarchical factor model \| variance decomposition

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Extent:	application/pdf
Series:	MPRA Paper.
Type of publication:	Book / Working Paper
Classification:	F31 - Foreign Exchange
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011113457