Exchange rates movements in Emerging Economies- Global vs Regional factors
Delphine Lahet  1@  
1 : Laboratoire d'analyse et de recherche en économie et finance internationales  (Larefi)  -  Site web
Université Montesquieu - Bordeaux IV : EA2954
Université Bordeaux, PAC de Pessac, Bâtiment recherche économie, avenue Léon Duguit 33608 PESSAC Cedex -  France

The aim of the article is to analyze the determinants of emerging markets' exchange rate movements, particularly for Asia. We implement a dynamic latent factor model to investigate the determinants of 24 emerging countries' exchange rates movements and decompose the evolutions into the contribution of a global factor, a regional factor and a country-specific factor. The results indicate that, on the whole period 2000-2015, the common global factor is by far the most important determinant of exchange rates variations for Asian economies and, albeit to a lesser extent, for Latin America. After 2005, there is a strong increase in the explanatory power of the regional factor in Asia, from 6% to 45%, becoming the dominant factor in this area. Then, we use a Vector Autoregressive model (VAR) and show that the regional factor Asia, estimated from the dynamic latent factor model, is mainly explained by Chinese economic variables. Indeed, our results highlight that bilateral exchange rate of China and macroeconomic economic climate in China greatly influence the regional factor Asia.


Personnes connectées : 2