Periodic Business and Exchange Rate Cycles
First published: 2020
Brief summary
Estimates parametric spectral density functions for exchange rate and GDP cyclical components across major emerging market economies, finding periodic exchange rate and business cycles with estimated lengths ranging from 4 to 8 years.
Article
Periodic Business and Exchange Rate Cycles is a peer-reviewed working paper published by IMK Working Paper (Institute for Macroeconomics and Policy) in 2020. It estimates parametric spectral density functions for exchange rate and GDP cyclical components across major emerging market economies, finding periodic exchange rate and business cycles with estimated lengths ranging from 4 to 8 years.
The analysis focuses on 4-8 years (estimated cycle length across most emerging economies). The data source is logged nominal USD exchange rate and real GDP cyclical components for multiple EMEs. It also considers parametric spectral density estimation via ARMA models. This gives the cycle claim a specific numerical and evidential setting rather than presenting periodicity only as a visual impression.
The article reports the following result: Several major emerging market economies exhibit periodic exchange rate and business cycles, with the dominant frequencies of the estimated dynamic factor generally similar between exchange rate and GDP series, and estimated cycle lengths ranging from 4 to 8 years. The interpretation is strongest when volatility, non-stationarity, market-regime changes and multiple-frequency testing are treated explicitly.
For cycles researchers, the article brings together exchange rate cycles, business cycles, emerging markets, spectral density. It is relevant to exchange-rate cycle research because periodic components must be separated from volatility, trend, market microstructure and changing monetary regimes.
Because it is a peer-reviewed working paper, the article is a strong starting point for discussion in the Exchange Rates forum, although its conclusions should still be compared with later replications and updated datasets.
Source details and credits
- Source / publisher: IMK Working Paper (Institute for Macroeconomics and Policy)
- Source type: Peer-reviewed working paper
- URL type: PDF
- Credits: IMK Working Paper (Institute for Macroeconomics and Policy)
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