Arbeitspapier

Real exchange rate decompositions

We provide a novel daily decomposition of the real exchange rate that exploits a direct link between bond and foreign exchange (FX) markets. Real exchange rate dynamics can be attributed to changes in the expected future level of the exchange rate; cross-country differentials of expected inflation, yields and bond term premia; and an FX risk premium. Through a variance decomposition exercise, we find that the FX risk premium is the dominant component. Monetary policies and macroeconomic news announcements largely move the real exchange through changes in the FX risk premium.

Sprache
Englisch

Erschienen in
Series: Bank of Canada Staff Discussion Paper ; No. 2022-6

Klassifikation
Wirtschaft
Interest Rates: Determination, Term Structure, and Effects
Foreign Exchange
Asset Pricing; Trading Volume; Bond Interest Rates
Thema
Asset pricing
Exchange rates
International financial markets
Monetary policy transmission

Ereignis
Geistige Schöpfung
(wer)
Feunou, Bruno
Fontaine, Jean-Sébastien
Krohn, Ingomar
Ereignis
Veröffentlichung
(wer)
Bank of Canada
(wo)
Ottawa
(wann)
2022

DOI
doi:10.34989/sdp-2022-6
Handle
Letzte Aktualisierung
10.03.2025, 11:42 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Feunou, Bruno
  • Fontaine, Jean-Sébastien
  • Krohn, Ingomar
  • Bank of Canada

Entstanden

  • 2022

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