This paper uses the factor-augmented VAR (FAVAR) framework to study the impact on the Hong Kong economy of the diverging monetary policies by the Fed, ECB and BoJ as well as the Mainland economy slowdown. The empirical results show that changes in US monetary policy mainly affect interest...

We identify five factors that can capture 95% of the variance across 39 United States (US) dollar exchange rates based on the principal component method. We use a time-varying parameter factor-augmented vector autoregressive model to analyze the determinants of movements in these exchange rates,...