Exchange rate movements and spillovers: evidence from the dynamic hierarchical factor model

2015 Fiscal Year Final Research Report

• Project/Area Number: 25380386
• Research Category: Grant-in-Aid for Scientific Research (C)
• Allocation Type: Multi-year Fund
• Section: 一般
• Research Field: Money/ Finance
• Research Institution: Tohoku University (2015); University of Tsukuba (2013-2014)
• Principal Investigator: Nagayasu Jun 東北大学, 経済学研究科(研究院), 教授 (30375422)
• Project Period (FY): 2013-04-01 – 2016-03-31
• Keywords: 外国為替市場 / 実質実効為替レート / ファクターモデル / ベイズ統計

Outline of Final Research Achievements

Using the Bayesian factor model, we decompose movements in real effective exchange rates, which can be considered a measure of external competitiveness, into global and country-specific factors. In data from a number of developed and developing countries, we find a particular global trend in these rates, but a substantial proportion of the variation in these rates is found to be country-specific. In addition, consistent with economic theory, this global factor is closely related to a trend in the global interest rate, while country-specific factors to idiosyncratic movements in countries’ own interest rates.

Free Research Field

国際金融