Third-country effects on the exchange rate

Kimberly Berg and Nelson Mark

Journal of International Economics, 2015, vol. 96, issue 2, 227-243

Abstract: Predictive regressions for bilateral exchange rates are typically run on variables from the associated bilateral pairs of countries. These regressions characteristically have low explanatory power, which leaves room for an omitted variables interpretation. We test whether these omitted variables are from third-countries. When third-country macro factors are added to bilateral exchange rate regressions, they enter significantly and increase the adjusted R2. A three-country exchange rate model illustrates potential channels for third-country spillovers to affect the bilateral rate.

Keywords: Exchange rates; Disconnect puzzle; Multi-country model (search for similar items in EconPapers)
JEL-codes: F31 F37 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199615000574
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Third-Country Effects on the Exchange Rate (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:96:y:2015:i:2:p:227-243

DOI: 10.1016/j.jinteco.2015.03.003

Access Statistics for this article

Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and Rodríguez-Clare, Andrés

More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().