Common factors and the exchange rate: results from the Brazilian case

Revista Brasileira de Economia

Wilson Rafael De Oliveira Felício²  José Luiz Rossi Júnior¹ 

[1] ,Insper Institute of Education and Research

关键词: Exchange rates;    Factor models;    Forecasting;   

DOI  :  10.1590/S0034-71402014000100004

来源: SciELO

【 摘 要 】

This paper studies the usefulness of factor models in explaining the dynamics of the exchange rate Real / Dollar from January 1999 to August 2011. The paper verifies that the inclusion of factors embedded on the common movements of exchange rates of a set of countries significantly improves the in-sample and out-of-sample predictive power of the models comprising only macroeconomic fundamentals commonly used in the literature to forecast the exchange rate. The paper also links the information contained in the factors to global shocks like the demand for dollars - a "dollar effect", volatility and liquidity of global financial markets.

【 授权许可】

CC BY   
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