Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/238082 
Year of Publication: 
2020
Series/Report no.: 
Working Papers No. 20-20
Publisher: 
Federal Reserve Bank of Boston, Boston, MA
Abstract: 
This paper presents new stylized facts about exchange rates and their relationship with macroeconomic fundamentals. We show that macroeconomic surprises explain a large majority of the variation in nominal exchange rate changes at a quarterly frequency. Using a novel present value decomposition of exchange rate changes that is disciplined with survey forecast data, we show that macroeconomic surprises are also a very important driver of the currency risk premium component and explain about half of its variation. These surprises have even greater explanatory power during economic downturns and periods of financial uncertainty.
Subjects: 
exchange rates
exchange rate disconnect
macroeconomic announcements
international finance
professional forecast
JEL: 
E44
F31
G14
G15
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
1.35 MB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.