What’s news in exchange rate dynamics: A DSGE approach

Kan Chen and Shage Zhang

Economics Letters, 2015, vol. 134, issue C, 133-137

Abstract: This paper examines the medium and long-term impacts of economic news on exchange rate movements. We extend a standard new open economy macroeconomics model by allowing anticipated (news) shocks in purchasing power parity and real interest rates, and perform a structural Bayesian estimation. Using 20 years of quarterly data from the US and the euro area, we find that anticipated shocks account for more than 40 percent of exchange rate fluctuations.

Keywords: Exchange rate; DSGE; News (search for similar items in EconPapers)
JEL-codes: F31 F37 F41 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:134:y:2015:i:c:p:133-137

DOI: 10.1016/j.econlet.2015.06.020

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