Real exchange rate decompositions / by Bruno Feunou, Jean-Sébastien Fontaine and Ingomar Krohn.: FB3-6/2022-6E-PDF
"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"--Abstract.
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| Department/Agency | Bank of Canada, issuing body. |
|---|---|
| Title | Real exchange rate decompositions / by Bruno Feunou, Jean-Sébastien Fontaine and Ingomar Krohn. |
| Series title | Staff discussion paper = Document d'analyse du personnel, 1914-0568 ; 2022-6 |
| Publication type | Series - View Master Record |
| Language | [English] |
| Format | Electronic |
| Electronic document | |
| Note(s) | "Last updated: March 22, 2022." Includes bibliographical references (page 45). |
| Publishing information | Ottawa, Ontario, Canada : Bank of Canada = Banque du Canada, 2022. ©2022 |
| Author / Contributor | Feunou, Bruno, author. |
| Description | 1 online resource (ii, 45 pages) : charts. |
| Catalogue number |
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| Subject terms | Foreign exchange rates. Monetary policy. Taux de change. Politique monétaire. |
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