<< N°171
| N°171 | ||
| Issue Q3 2022 | ||
| Common and idiosyncratic movements in Latin-American exchange rates | ||
|
Fredy Gamboa-Estrada José Vicente Romero |
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| We propose a simple theoretical and empirical approach to differentiate between common and idiosyncratic exchange rate movements in 5 Latin-American economies: Brazil, Chile, Colombia, Mexico, and Peru. Our approach allows us to distinguish the effects of a regional exchange rate common factor and macroeconomic fundamentals differentials on exchange rates. The methodology and estimation strategy are suitable for both low- and high-frequency settings. We provide evidence that the regional common factor is important to assess the dynamics of the Latin-American exchange rates. In our estimations, the relation between exchange rates and the common factor is contemporaneous and stable during the studied period. |
Abstract |
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| Exchange rate ; Exchange rate in Latin-American countries ; Factor model Forecasting and simulation ; | Keywords | |
| F31 ; F37 ; G17 ; | JEL classification | |
| Order form |