کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
964001 | 1479175 | 2014 | 19 صفحه PDF | دانلود رایگان |
• An arbitrage-free international macro-finance model is proposed.
• A close link between macroeconomic fundamentals and the exchange rate dynamics is found.
• 57% variation of the observed data can be explained.
• The results are robust for other major exchange rates.
In this paper, we propose an arbitrage-free international macro-finance model that links the exchange rate dynamics to macroeconomic fundamentals. Jointly using data on exchange rates, yields of zero-coupon bonds, and macroeconomic variables of the US and the Euro area, we find a close link between macroeconomic fundamentals and the exchange rate dynamics. The model-implied monthly exchange rate changes can explain about 57% variation of the observed data. The macroeconomic innovations can help capture large variation of exchange rate changes. Robustness checks show that the results also hold for other major exchange rates.
Journal: Journal of International Money and Finance - Volume 41, March 2014, Pages 46–64