Determinants of the Dinar-Euro Nominal Exchange Rate

Milan Nedeljković and Branko Urošević ()
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Milan Nedeljković: National Bank of Serbia, Belgrade and .Faculty of Economics, Finance and Administration, Singidunum University, Belgrade, Serbia.
Branko Urošević: Faculty of Economics, University of Belgrade and National Bank of Serbia.

Journal for Economic Forecasting, 2012, issue 3, 121-141

Abstract: This paper studies the drivers of the daily dynamics of the nominal dinar-euro exchange rate from September 2006 to June 2010. Using a novel semiparametric approach we are able to incorporate the evidence of nonlinearities under very weak assumptions on the underlying data generating process. We identify several factors influencing daily exchange rate returns whose importance varies over time. In the period preceding the financial crisis, information in past returns, changes in households’ foreign currency savings and banks' net purchases of foreign currency are the most significant factors. From September 2008 onwards other factors related to changes in country's risk and the information processing in the market gain importance. NBS interventions are found to be effective with a time delay.

Keywords: foreign exchange market; partially linear model; splines; kernel; Serbia (search for similar items in EconPapers)
JEL-codes: C14 F31 G18 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2012:i:3:p:121-141

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