Exchange Rates as Exchange Rate Common Factors

Ryan Greenaway-McGrevy, Nelson Mark, Donggyu Sul (d.sul@utdallas.edu) and Jyh-Lin Wu
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Jyh-Lin Wu: National Sun Yat Sen University

No 212012, Working Papers from Hong Kong Institute for Monetary Research

Abstract: 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
Date: 2012-08
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Citations: View citations in EconPapers (22)

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Working Paper: Exchange Rates as Exchange Rate Common Factors (2012)
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