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
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Englisch
- Erschienen in
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Series: Bank of Canada Staff Discussion Paper ; No. 2022-6
- Klassifikation
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Wirtschaft
Interest Rates: Determination, Term Structure, and Effects
Foreign Exchange
Asset Pricing; Trading Volume; Bond Interest Rates
- Thema
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Asset pricing
Exchange rates
International financial markets
Monetary policy transmission
- Ereignis
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Geistige Schöpfung
- (wer)
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Feunou, Bruno
Fontaine, Jean-Sébastien
Krohn, Ingomar
- Ereignis
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Veröffentlichung
- (wer)
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Bank of Canada
- (wo)
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Ottawa
- (wann)
-
2022
- DOI
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doi:10.34989/sdp-2022-6
- Handle
- Letzte Aktualisierung
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10.03.2025, 11:42 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Feunou, Bruno
- Fontaine, Jean-Sébastien
- Krohn, Ingomar
- Bank of Canada
Entstanden
- 2022