Sources of Real Exchange Rate Fluctuations: How Important are Nominal Shocks?

Richard Clarida and Jordi Galí

No 951, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper attempts to identify the sources of real exchange rate fluctuations since the collapse of the Bretton Woods period. We use a structural VAR model with recursive long-run restrictions to decompose the real exchange rate series into three components, associated with supply, demand and monetary shocks. Our estimates imply that monetary shocks account for a substantial fraction of the variability of both yen and Deutschmark real exchange rate variations against the dollar. Demand shocks appear as the largest source of real exchange rate fluctuations for all the currencies considered, while supply shocks seem to play a minor role.

Keywords: Flexible Exchange Rates; Permanent-Transitory Decompositions; Real Exchange Rate Fluctuations; Structural VAR (search for similar items in EconPapers)
JEL-codes: C32 F31 (search for similar items in EconPapers)
Date: 1994-06
References: Add references at CitEc
Citations: View citations in EconPapers (333)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=951 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Sources of real exchange-rate fluctuations: How important are nominal shocks? (1994)
Journal Article: Sources of real exchange rate fluctuations: how important are nominal shocks? (1994)
Working Paper: Sources of Real Exchange Rate Fluctuations: How Important are Nominal Shocks? (1994)
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:cpr:ceprdp:951

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... pers/dp.php?dpno=951

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().