Exchange Rates as Exchange Rate Common Factors
Nelson Mark (),
Donggyu Sul () and
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Jyh-Lin Wu: National Sun Yat Sen University
No 212012, Working Papers from Hong Kong Institute for Monetary Research
Factor analysis performed on a panel of 23 nominal exchange rates from January 1999 to December 2010 yields three common factors. This paper identifies the euro/dollar, Swiss-franc/dollar and yen/dollar exchange rates as empirical counterparts to these common factors. These empirical factors explain a large proportion of exchange rate variation over time and have significant in-sample and out-of-sample predictive power.
Keywords: Exchange Rates; Common Factors; Forecasting (search for similar items in EconPapers)
JEL-codes: F31 F37 (search for similar items in EconPapers)
Pages: 29 pages
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Working Paper: Exchange Rates as Exchange Rate Common Factors (2012)
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