Exchange rates and macroeconomic fundamentals: Evidence of instabilities from time-varying factor loadings

IF 2.3 3区经济学 Q2 ECONOMICS

Journal of Applied Econometrics Pub Date : 2023-05-12 DOI:10.1002/jae.2984

Eric Hillebrand, Jakob Guldbæk Mikkelsen, Lars Spreng, Giovanni Urga

引用次数: 0

Abstract

We examine the relationship between exchange rates and macroeconomic fundamentals using a two-step maximum likelihood estimator through which we compute time-varying factor loadings. Factors are obtained as principal components, extracted from vintage macro-datasets that combine FRED-MD and OECD databases. Using 14 currencies over 1990–2021, we show that the loadings on the factors vary considerably over time and increase the percentage of explained variation in exchange rates by an order of magnitude. Time-varying loadings improve the overall predictive ability of the model, especially during crises, and lead to better forecasts of sign changes in exchange rates.

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汇率和宏观经济基本面：来自时变因素负载的不稳定性证据

我们使用两步最大似然估计来检验汇率和宏观经济基本面之间的关系，通过该估计来计算时变因素负载。因子是从结合FRED-MD和OECD数据库的老式宏观数据集中提取的主要成分。使用1990-2021年的14种货币，我们发现这些因素的负荷随着时间的推移变化很大，并将解释的汇率变化的百分比增加了一个数量级。时变载荷提高了模型的整体预测能力，尤其是在危机期间，并能更好地预测汇率的符号变化。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Applied Econometrics Multiple-

CiteScore

3.70

自引率

4.80%

发文量

期刊介绍： The Journal of Applied Econometrics is an international journal published bi-monthly, plus 1 additional issue (total 7 issues). It aims to publish articles of high quality dealing with the application of existing as well as new econometric techniques to a wide variety of problems in economics and related subjects, covering topics in measurement, estimation, testing, forecasting, and policy analysis. The emphasis is on the careful and rigorous application of econometric techniques and the appropriate interpretation of the results. The economic content of the articles is stressed. A special feature of the Journal is its emphasis on the replicability of results by other researchers. To achieve this aim, authors are expected to make available a complete set of the data used as well as any specialised computer programs employed through a readily accessible medium, preferably in a machine-readable form. The use of microcomputers in applied research and transferability of data is emphasised. The Journal also features occasional sections of short papers re-evaluating previously published papers. The intention of the Journal of Applied Econometrics is to provide an outlet for innovative, quantitative research in economics which cuts across areas of specialisation, involves transferable techniques, and is easily replicable by other researchers. Contributions that introduce statistical methods that are applicable to a variety of economic problems are actively encouraged. The Journal also aims to publish review and survey articles that make recent developments in the field of theoretical and applied econometrics more readily accessible to applied economists in general.