Abstract
Abstract This paper applies a common factors analysis framework to an exchange rate data panel, in order to better understand the forces behind exchange rate dynamics and provide a set of variables for exchange rate forecasting. Results demonstrate the model’s ability to extract key information to under-stand the driving forces of exchange rate movements using the exchange rate Brazilian Real to U.S. dollar; in addition, the model also shows statistically significant improvement in terms of forecasting performance in relation to the random walk benchmark as well as to traditional macroeconomic models found in economics literature. JEL classification numbers: F31, F37, F47. Keywords: Exchange rate, Common factors, Forecasting.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
