Large Swings in Currencies driven by Fundamentals

Phornchanok Cumperayot () and Casper G. de Vries ()
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Phornchanok Cumperayot: Chulalongkorn University

No 06-086/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Exchange rate returns are fat-tailed distributed. We provide evidence that the apparent non-normality derives from the behavior of macroeconomic fundamentals. Economic and probabilistic arguments are offered for such a relationship. Empirical support is given by testing against normality and through investigating the tail shapes of the fundamentals' distributions. The currently available data sets on floating exchange rates permit a clearer picture than the relatively short spans with macroeconomic data available previously.

Keywords: exchange rates; fundamentals; fat-tailed distributions (search for similar items in EconPapers)
JEL-codes: E44 F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2006-10-06
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Persistent link: http://EconPapers.repec.org/RePEc:dgr:uvatin:20060086

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