کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
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974071 | 1479795 | 2011 | 24 صفحه PDF | دانلود رایگان |
In this paper, I consider modeling the effects of the macroeconomic determinants on the nominal exchange rate to be channeled through the transition probabilities in a Markovian process. The model posits that the deviation of the exchange rate from its fundamental value alters the market's belief in the probability of the process staying in certain regime next period. This paper further takes into account the ARCH effects of the volatility of the exchange rate. Empirical results generally confirm that fundamentals can affect the evolution of the dynamics of the exchange rate in a nonlinear way through the transition probabilities. In addition, I find that the volatility of the exchange rate is associated with significant ARCH effects which are subject to regime changes.
Journal: The North American Journal of Economics and Finance - Volume 22, Issue 2, August 2011, Pages 197–220