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Exchange Rates as Exchange Rate Common Factors

Nelson Mark

No 11, Working Papers from University of Notre Dame, Department of Economics

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: 2012-03, Revised 2012-03
New Economics Papers: this item is included in nep-for and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (19)

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