Drivers of exchange rate dynamics in selected CIS countries: Evidence from a FAVAR analysis

Christian Dreger and Jarko Fidrmuc

No 289, Working Papers from Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies)

Abstract: We investigate the likely sources of exchange rate dynamics in selected CIS countries (Russia, Kazakhstan, Ukraine, Kyrgyzstan, Azerbaijan, and Moldova) over the last dec-ade (1999-2010). Evidence is based on country VARs augmented by a regional com-mon factor structure (FAVAR model). The models include nominal exchange rates, the common factor of exchange rates in the CIS countries, and international drivers such as global trade, share prices, and oil price. Global, regional and idiosyncratic shocks are identified in a standard Cholesky fashion. Their relevance for exchange rates is ex-plored by a decomposition of the variance of forecast errors. The impact of global shocks to in the developments of exchange rates has increased, in particular, if financial shocks are considered. Because of the financial crisis, regional shocks have become more important at the expense of global shocks.

Keywords: Exchange rates; CIS countries; financial crisis; FAVAR models (search for similar items in EconPapers)
JEL-codes: C22 F31 G15 (search for similar items in EconPapers)
Pages: 12
Date: 2010-08
New Economics Papers: this item is included in nep-cis, nep-ifn and nep-tra
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Drivers of Exchange Rate Dynamics in Selected CIS Countries: Evidence from a FAVAR Analysis (2009)
Working Paper: Drivers of Exchange Rate Dynamics in Selected CIS Countries: Evidence from a FAVAR Analysis (2009)
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