Empirical Investigation of the Effects of the Fundamentals on the Exchange Rate
Abstract
Este documento de investigación examina, utilizando varias técnicas de econometría, los efectos de reservas extranjeras y otras variables fundamentales en la tasa de cambio que utiliza la teoría de la zona de bandas. Para ello utiliza datos mensuales de Chile desde enero 1979 hasta noviembre 1997. Los datos utilizados consisten en reservas extranjeras, el crédito del Banco Central, las reservas domésticas, las importaciones, las exportaciones, los reclamos en el Gobierno, el PIB, las obligaciones extranjeras y el tipo de interés domestico y extranjero. Encontramos que la diferencia de las tasas de interes no tiene ningun efecto en la depreciación, rechazando la implicación de la zona de bandas por el que el tipo de interes domestico se puede utilizar para manejar la tasa de cambio. Encontramos que las reservas extranjeras sostienen la tasa de cambio reduciendo la depreciacion de la tasa de cambio, y la tasa de cambio y las reservas extranjeras siguen una relacion negativa, que sostiene la teoría de que aumentando las reservas extranjeras aprecian la tasa de cambio.
This paper examines, by using several econometric techniques, the effects of foreign reserves and other fundamental variables on the exchange rate using the target zone theory. This paper uses monthly data for Chile from January 1979 to November 1 997. The data used consists of foreign reserves, credit from the Central Bank, domestic reserves, imports, exports, claims on government, GDP, foreign liabilities, domestic and foreign interest rate. We find that the interest differential does not have any effect on depreciation, rejecting the target zone implication that the domestic interest rate can be used to manage the exchange rate. We find that foreign reserves support the exchange rate by reducing the exchange rate depreciation, and the exchange rate and foreign reserves follow a negative relationship, which supports the assumption that increasing the foreign reserves appreciates the exchange rate.
This paper examines, by using several econometric techniques, the effects of foreign reserves and other fundamental variables on the exchange rate using the target zone theory. This paper uses monthly data for Chile from January 1979 to November 1 997. The data used consists of foreign reserves, credit from the Central Bank, domestic reserves, imports, exports, claims on government, GDP, foreign liabilities, domestic and foreign interest rate. We find that the interest differential does not have any effect on depreciation, rejecting the target zone implication that the domestic interest rate can be used to manage the exchange rate. We find that foreign reserves support the exchange rate by reducing the exchange rate depreciation, and the exchange rate and foreign reserves follow a negative relationship, which supports the assumption that increasing the foreign reserves appreciates the exchange rate.
Description
No. 4