Vania Stavrakeva: A Fundamental Connection: Exchange Rates and Macroeconomic Expectations
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.
Date: 16 November 2021, 13:15 (Tuesday, 6th week, Michaelmas 2021)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room A or https://zoom.us/j/93987778529?pwd=czZQUFh6aTVLNk9QQjd6RnNxNmtpQT09
Speaker: Vania Stavrakeva (London Business School)
Organising department: Department of Economics
Part of: Seminar in Macroeconomics
Booking required?: Not required
Audience: Members of the University only
Editor: Emma Heritage