Innovation Accounting with Incomplete Identification of a Structural VAR – An Application to Exchange Rates

2012 ◽  
Author(s):  
Vadhindran K. Rao
Keyword(s):  
Exchange Rates ◽  
Structural Var

How Important are Nominal Shocks in Driving Real Exchange Rates? / Wie bedeutend sind nominale Schocks zur Erklärung realer Wechselkursbewegungen?

2005 ◽  
Vol 225 (2) ◽  
Author(s):  
Bernd Kempa
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Dominant Role ◽  
Real Exchange Rates ◽  
Asset Price ◽  
Structural Var ◽  
Impulse Response Functions ◽  
Similar Data ◽  
Structural Vars ◽  
Nominal Shocks

SummaryMost of the extant literature identifies the sources of real exchange rate fluctuations by means of structural VAR analysis using long-run identification restrictions only. This paper presents an analogous decomposition on the basis of a simple textbook model of exchange rate determination, where identification is achieved after a suitable triangularization. This identification strategy allows for a calibration on the basis of the contemporaneous restrictions implied by the model. In order to facilitate a comparison with the results from the structural VAR studies, very similar data are used here as well. These are quarterly data collected on the bilateral exchange rates for the Deutsche Mark, the British Pound and the Japanese Yen, all relative to the U.S. Dollar. The implied impulse response functions of the model exhibit impact reactions of the exchange rate following either a monetary (nominal) or a real shock, thus conforming to the asset price property of exchange rates. This is in contrast to the delayed exchange rate responses typical in the structural VAR studies. Moreover, the variance decompositions indicate a dominant role for real shocks, with nominal shocks recognizable at best only in the short run. These results correspond quite closely to those obtained from structural VARs.

scholarly journals An Investigation into the Sources of Depreciations in Mongolian Tugrik Exchange Rate: A Structural VAR Approach

2021 ◽  
Vol 14 (11) ◽  
pp. 529
Author(s):  
Gunbileg Ganbayar
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Forecast Error ◽  
Nominal Exchange Rate ◽  
Structural Var ◽  
The Real ◽  
Long Run ◽  
Exchange Rate Movements ◽  
Exchange Rate Level ◽  
Nominal Shocks

This paper empirically investigates the sources of fluctuations in real and nominal Mongolian Tugrik (MNT) exchange rates by estimating the structural vector autoregressive (SVAR) model over the period January 1994–May 2021 and decomposing the exchange rate series into stochastic components induced by real and nominal shocks under the assumption of the long-run neutrality of nominal shocks on the real exchange rate level. The empirical results show that the real MNT exchange rate movements are primarily due to the real shocks, while the nominal shocks have a major role in explaining nominal exchange rate movements in the short and long run. The nominal exchange rate shows a delayed over-shooting occurring between one and three years after a nominal shock hits the economy. The long-run effect of a monthly one standard deviation nominal shock on nominal MNT exchange rate is 2.5%, which results in a permanent divergence between real and nominal MNT exchange rate and causes non-cointegrated relation between real and nominal MNT exchange rates. The historical decomposition of forecast error indicates that the nominal shock plays a significant role in explaining the depreciation in nominal MNT exchange rate over the last three decades. Our recommendation is to stop “cash handling” policy, minimize monetary shock, and coordinate fiscal and monetary policies to avoid large nominal depreciation.

Sources of fluctuations in exchange rates: a structural VAR analysis

1996 ◽  
Vol 3 (4) ◽  
pp. 251-254 ◽  
Author(s):  
Nicos Apergis ◽  
Costas Karfakis
Keyword(s):  
Exchange Rates ◽  
Structural Var ◽  
Var Analysis

scholarly journals O Conteúdo Informacional das Transações no Mercado Futuro de Câmbio: uma investigação do caso brasileiro

2016 ◽  
Vol 14 (1) ◽  
pp. 7
Author(s):  
Vanessa Neumann Sulzbach ◽  
João Mergulhão ◽  
Pedro L. Valls Pereira
Keyword(s):  
Asymmetric Information ◽  
Exchange Rates ◽  
Private Information ◽  
Market Liquidity ◽  
Structural Var ◽  
Order Flow ◽  
Trading Costs ◽  
Price Variation ◽  
Efficient Price ◽  
Fx Market

The microstructure approach to exchange rates have received special attention in recent years, particularly because it highlights the existence of asymmetric information in this market. The Brazilian future FX market data provided from BM&F was used to test the private information effects of trading on prices. The structural VAR results confirm the existence of asymmetric information in this market, indicating that roughly 50% of all efficient price variation is due to the private information of the order flow. Additionally, the order flow observation allows the informed and uninformed arrival rates estimation, which we use to calculate the probability of information-based trade (PIN). High PIN value leads to wide spreads, which reduces the market liquidity. The PIN results about 1.53% indicate the liquidity of Brazilian future FX market is quite high, what impound fewer trading costs for the uninformed agents.

Fear of Free Floating or Forced Exchange Rate Fixing

2004 ◽  
pp. 112-122
Author(s):  
O. Osipova
Keyword(s):  
Exchange Rate ◽  
Financial Crisis ◽  
Exchange Rates ◽  
Inflation Targeting ◽  
Exchange Rate Policy ◽  
Float Exchange Rate ◽  
Floating Exchange Rate ◽  
Rate Policy ◽  
Exchange Rate Arrangements ◽  
Pass Through

After the financial crisis at the end of the 1990 s many countries rejected fixed exchange rate policy. However actually they failed to proceed to announced "independent float" exchange rate arrangement. This might be due to the "fear of floating" or an irreversible result of inflation targeting central bank policy. In the article advantages and drawbacks of fixed and floating exchange rate arrangements are systematized. Features of new returning to exchange rates stabilization and possible risks of such policy for Russia are considered. Special attention is paid to the issue of choice of a "target" currency composite which can minimize external inflation pass-through.

An Empirical Investigation of Factors Affecting Stock Prices in Vietnam

2014 ◽  
pp. 74-89 ◽  
Author(s):  
Vinh Vo Xuan
Keyword(s):  
Exchange Rates ◽  
Crude Oil ◽  
Foreign Exchange ◽  
Stock Prices ◽  
Global Financial Crisis ◽  
Oil Prices ◽  
Foreign Exchange Rates ◽  
Factors Affecting ◽  
Crude Oil Prices ◽  
Before And After

This paper investigates factors affecting Vietnam’s stock prices including US stock prices, foreign exchange rates, gold prices and crude oil prices. Using the daily data from 2005 to 2012, the results indicate that Vietnam’s stock prices are influenced by crude oil prices. In addition, Vietnam’s stock prices are also affected significantly by US stock prices, and foreign exchange rates over the period before the 2008 Global Financial Crisis. There is evidence that Vietnam’s stock prices are highly correlated with US stock prices, foreign exchange rates and gold prices for the same period. Furthermore, Vietnam’s stock prices were cointegrated with US stock prices both before and after the crisis, and with foreign exchange rates, gold prices and crude oil prices only during and after the crisis.

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