Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/147762
Authors: 
Regõs, Gábor
Year of Publication: 
2015
Citation: 
[Journal:] Cogent Economics & Finance [ISSN:] 2332-2039 [Volume:] 3 [Year:] 2015 [Issue:] 1 [Pages:] 1-10
Abstract: 
This paper builds two factor discrete time models in order to investigate the effect of sovereign risk on the nominal exchange rates in a Markov switching framework. The empirical section of the paper uses seven currencies from Chile, the Czech Republic, Hungary, Iceland, Japan, Korea, and Mexico. To measure the sovereign risk, we use the credit rating agencies' ratings classes as proxy variable. In the empirical part, four different versions of the model are calibrated and their in-sample and out-of-sample data will be analyzed leading to the conclusion that none of the four versions dominates the others. As an additional result, it is revealed that risk has significant effect on the nominal exchange rates.
Subjects: 
exchange rate
multifactor model
ratings classes
Markov-switching model
JEL: 
C15
C33
C53
F31
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/4.0/
Document Type: 
Article

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