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Forecasting exchange rate based on macroeconomic variables: a GVAR approach

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posted on 28.03.2022, 12:19 authored by Vidhi Nandini
In this thesis, we conduct this study to forecast real effective exchange rate based on macroeconomic variables such as unemployment rate, real interest rate, current share price, industrial production, terms of trade and terms spread along with a global variable real commodity price index. We employ Global Vector Autoregression model (GVAR) developed by Pesaran (2004) and analyse the global impact of the country specific domestic variables on various exchange rates. Our empirical analysis with the help of impulse response reveals that positive shock to the UK and US share price has significant impact on Canadian dollar. Furthermore, a positive shock to the real commodity price index reflects some striking result, narrating that it has significant impact not only on the exchange rate but also on the real interest rate,terms of trade and industrial production. Using newly assembled data and hitherto applied methodologies; we believe that this study imparts valuable insights into the role of the macroeconomic variable on the foreign exchange rate market.


Table of Contents

Chapter 1. Introduction -- Chapter 2. Literature review -- Chapter 3. Data set -- Chapter 4. Methodologies, estimation and results -- Chapter 5. Impulse response analysis method and results -- Chapter 6. Conclusion and further research.


"October 2015". Bibliography: pages 46-50 "A thesis submitted to Macquarie University in partial fulfilment of the requirements for the degree of Master of Research". Empirical thesis.

Awarding Institution

Macquarie University

Degree Type

Thesis MRes


MRes, Macquarie University, Faculty of Business and Economics, Department of Economics

Department, Centre or School

Department of Economics

Year of Award


Principal Supervisor

Jeffrey Sheen

Additional Supervisor 1

Shuping Shi


Copyright Vidhi Nandini 2015. Copyright disclaimer: http://www.copyright.mq.edu.au/






1 online resource (50 pages) illustrations

Former Identifiers

mq:45221 http://hdl.handle.net/1959.14/1075871