 Macroeconomic Factors and the Balanced Value of the Czech Koruna/Euro Exchange Rate (in English)Jan Bruha and Alexis Derviz () Czech Journal of Economics and Finance (Finance a uver), 2006, vol. 56, issue 7-8, 318-343 Abstract: The authors study the dependence of the Czech koruna’s exchange rate to the euro on risk factors that cannot be reduced to standard macroeconomic fundamentals. For this purpose, they construct an international asset-pricing model in which the exchange rate is codetermined by a risk factor imperfectly correlated with other priced risks in the economy. The model embeds the standard no-arbitrage setup. It also contains an additional equation that links the autarchic currency price with the foreign-exchange order flow. In the state-space form, the unobserved variables that determine the dynamics of the asset markets, the autarchic exchange rate, and the FX order flow span a number of macroeconomic and latent risk factors. The model for the Czech koruna/euro exchange rate uses Kalman filter techniques. The results indicate the existence of a “non-fundamental” source of systematic divergence between the observed and the autarchic (i.e. fundamental) FX returns. Keywords: exchange rate; latent risk; order flow; pricing kernel; state space (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:56:y:2006:i:7-8:p:318-343 Access Statistics for this article More articles in Czech Journal of Economics and Finance (Finance a uver) from Charles University Prague, Faculty of Social Sciences Contact information at EDIRC. |
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