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dc.contributor.authorCayen, Jean-Philippeen_US
dc.contributor.authorColetti, Donalden_US
dc.contributor.authorLalonde, Renéen_US
dc.contributor.authorMaier, Philippen_US
dc.date.accessioned2011-12-15T12:58:29Z-
dc.date.available2011-12-15T12:58:29Z-
dc.date.issued2010en_US
dc.identifier.urihttp://hdl.handle.net/10419/53939-
dc.description.abstractWe use a novel approach to identify economic developments that drive exchange rates in the long run. Using a panel of six quarterly U.S. bilateral real exchange rates Australia, Canada, the euro, Japan, New Zealand and the United Kingdom over the 1980-2007 period, a dynamic factor model points to two common factors. The first factor is driven by U.S. shocks, and cointegration analysis points to a long-run statistical relationship with the U.S. debt-to-GDP ratio, relative to all other countries in our sample. The second common factor is driven by commodity prices. Incorporating these relationships directly into a state-space model, we find highly significant coefficients. Then, we decompose the historical variation of each exchange rate into U.S. shocks, commodities, and a domestic component. We find a strong role for economic fundamentals: Changes in the two common factors, which are driven by the (relative) U.S. debt-to-GDP ratio and commodity prices, can explain between 36 and 96 per cent of individual countries' exchange rates in our panel.en_US
dc.language.isoengen_US
dc.publisherBank of Canada Ottawaen_US
dc.relation.ispartofseriesBank of Canada Working Paper 2010,5en_US
dc.subject.jelJ31en_US
dc.subject.ddc330en_US
dc.subject.keywordExchange ratesen_US
dc.subject.keywordEconometric and statistical methodsen_US
dc.subject.stwWechselkursen_US
dc.subject.stwÖffentliche Schuldenen_US
dc.subject.stwVolkswirtschaften_US
dc.subject.stwUS-Dollaren_US
dc.subject.stwAustralienen_US
dc.subject.stwKanadaen_US
dc.subject.stwNeuseelanden_US
dc.subject.stwGroßbritannienen_US
dc.subject.stwEuropäische Wirtschafts- und Währungsunionen_US
dc.subject.stwJapanen_US
dc.titleWhat drives exchange rates? New evidence from a panel of US dollar bilateral exchange ratesen_US
dc.typeWorking Paperen_US
dc.identifier.ppn618958835en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Bank of Canada Working Papers

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