Common factors and the exchange rate: results from the Brazilian case

Felício, Wilson Rafael de Oliveira; Júnior, José Luiz Rossi

doi:10.1590/s0034-71402014000100004

Cited by 3 publications

(1 citation statement)

References 54 publications

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“…and it can explain part of the daily variation of the nominal exchange rate (Kohlscheen et al (2017)). Motivated by Felício and Rossi Júnior (2014), who extract common factors from a set of floating exchange rates and assess their predictive capacity, we consider 17 foreign exchange rates as possible predictors. We also investigate gold as a possible predictor, due to a possible bi-directional causal relationship with exchange rates in emerging countries (Gürış and Kiran (2014), Nair et al (2015)).…”

Section: Introductionmentioning

confidence: 99%

Brazilian Exchange Rate Forecasting in High Frequency

Rossi¹,

Piccioni²,

Rossi³

et al. 2022

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We investigated the predictability of the Brazilian exchange rate at High Frequency (1, 5 and 15 minutes), using local and global economic variables as predictors. In addition to the Linear Regression method, we use Machine Learning algorithms such as Ridge, Lasso, Elastic Net, Random Forest and Gradient Boosting. When considering contemporary predictors, it is possible to outperform the Random Walk at all frequencies, with local economic variables having greater predictive power than global ones. Machine Learning methods are also capable of reducing the mean squared error. When we consider only lagged predictors, it is possible to beat the Random Walk if we also consider the Brazilian Real futures as an additional predictor, for the frequency of one minute and up to two minutes ahead, confirming the importance of the Brazilian futures market in determining the spot exchange rate.

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Section: Introductionmentioning

confidence: 99%

Brazilian Exchange Rate Forecasting in High Frequency

Rossi¹,

Piccioni²,

Rossi³

et al. 2022

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Real Effective Exchange Rates and deindustrialization: Evidence from 25 Post-Communist Eastern European countries

Čizmović

Shachmurove

Vulanović

2021

Post-Communist Economies

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Common and idiosyncratic movements in Latin-American Exchange Rates

Gamboa‐Estrada¹,

Romero²

2021

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We propose a simple theoretical and empirical approach to differentiate between common and idiosyncratic exchange rate movements in 5 Latin-American economies: Brazil, Chile, Colombia, Mexico, and Peru. Our approach allows us to distinguish the effects on exchange rates of a regional exchange rate common factor and macroeconomic fundamentals differentials. The methodology and estimation strategy are suitable for both low and high frequency settings. We provide evidence that the regional common factor has a significant effect on the dynamics of the Latin-American exchange rates. In our estimations the relation between exchange rates and the common factor is contemporaneous and stable during the studied period.

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Common factors and the exchange rate: results from the Brazilian case

Cited by 3 publications

References 54 publications

Brazilian Exchange Rate Forecasting in High Frequency

Brazilian Exchange Rate Forecasting in High Frequency

Real Effective Exchange Rates and deindustrialization: Evidence from 25 Post-Communist Eastern European countries

Common and idiosyncratic movements in Latin-American Exchange Rates

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