Drivers of Exchange Rate Dynamics in Selected CIS Countries: Evidence from a FAVAR Analysis

Christian Dreger and Jarko Fidrmuc

No 867, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We investigate the likely sources of exchange rate dynamics in selected CIS countries (Russia, Kazakhstan, Ukraine, Kyrgyzstan, Azerbaijan, and Moldova) over the past decade (1999-2008). The analysis is based on country VAR models augmented by a regional common factor structure (FAVAR model). The models include nominal exchange rates, the common factor of exchange rates in the CIS countries, and global drivers such as gold, oil and share prices. Global, regional and idiosyncratic shocks are identified in a standard Cholesky fashion. Based on the decomposition of the variance of forecast errors, their relevance for exchange rates is explored. As a quite robust finding, CIS exchange rates have become more vulnerable to global shocks towards the end of the sample.

Keywords: Exchange rates; CIS countries; financial crisis; FAVAR models (search for similar items in EconPapers)
JEL-codes: C22 F31 G15 (search for similar items in EconPapers)
Pages: 14 p.
Date: 2009
New Economics Papers: this item is included in nep-cba, nep-cis, nep-ifn and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Drivers of exchange rate dynamics in selected CIS countries: Evidence from a FAVAR analysis (2010)
Working Paper: Drivers of Exchange Rate Dynamics in Selected CIS Countries: Evidence from a FAVAR Analysis (2009)
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