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The random forest path of real exchange rate misalignments. The Argentinean case

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  • Fernando Zarzosa Valdivia
  • Maximiliano Micheli

Abstract

This research studies the dynamics of the misalignments of the purchasing power parity real exchange rate, which are based on equilibrium values measured by the Hodrick and Prescott and the Christiano-Fitzgerald filters. Following a theoretical model, the behaviour of real exchange rate misalignments is featured by Random Forest Models; which is a novelty on these regards. Real exchange rate misalignments, which are of short nature, are explained, in importance order, for their lagged values (up to the third order), the market turbulence index, the nominal exchange rates, the volatility VIX index, the interest rates, the seigniorage and the international reserves. En este trabajo evaluamos la dinámica de los desalíneos del tipo de cambio real, desde un punto de vista teórico y desde una visión práctica aplicando modelos de Bosques Aleatorios. Incorporamos como variables explicativas de dichos desalíneos al índice de turbulencia de mercado (o sus componentes, tipo de cambio nominal, reservas y tasas de interés), la cantidad de dinero, el índice de volatilidad VIX y los rezagos de los desalineos cambiarios. Contribuimos a la literatura tanto en la aplicación del modelo de bosques aleatorios como en la inclusión de variables explanatorias de los desalíneos del tipo de cambio real.

Suggested Citation

  • Fernando Zarzosa Valdivia & Maximiliano Micheli, 2020. "The random forest path of real exchange rate misalignments. The Argentinean case," Asociación Argentina de Economía Política: Working Papers 4429, Asociación Argentina de Economía Política.
    • Handle: RePEc:aep:anales:4429
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    File URL: https://aaep.org.ar/works/works2020/Zarzosa_Micheli.pdf
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    References listed on IDEAS

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    1. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1994. "Speculative Attacks on Pegged Exchange Rates: An Empirical Exploration with Special Reference to the European Monetary System," CEPR Discussion Papers 1060, C.E.P.R. Discussion Papers.
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    3. Ghura, Dhaneshwar & Grennes, Thomas J., 1993. "The real exchange rate and macroeconomic performance in Sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 42(1), pages 155-174, October.
    4. Joan Robinson, 1979. "The Generalisation of the General Theory," Palgrave Macmillan Books, in: The Generalisation of the General Theory and other Essays, edition 0, pages 1-76, Palgrave Macmillan.
    5. Mr. Evan C Tanner, 2002. "Exchange Market Pressure, Currency Crises, and Monetary Policy: Additional Evidence From Emerging Markets," IMF Working Papers 2002/014, International Monetary Fund.
    6. Eric J. Pentecost, 1993. "Exchange Rate Dynamics," Books, Edward Elgar Publishing, number 355.
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    More about this item

    Keywords

    Real exchange rate; Hodrick and Prescott filter misalignment; Christiano-Fitzgerald misalignment; Random Forest; Market turbulence index; volatility VIX index;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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