The law of one price (LOP) plays an important role as a building block in theories of international trade and exchange rate determination. It also serves as a measure of integration for international commodity markets. The LOP states that in competitive markets after adjustment for transportation costs and trade barriers, identical commodities sold in different countries should sell for the same price when their prices are defined in a common currency. The existing economic literature provides a vast body of theoretical and empirical investigations of the validity of the LOP. In general, previous evidence is mixed and there is no unanimous LOP support or refutation. The effects of exchange rate changes on agricultural outputs have been extensively studied, but the issue of the impacts on traded non-farm produced inputs has not been explored as much. This study investigates the impact of the exchange rate ($CN/$US) on the relative prices in U.S. and Canadian agricultural markets for five major farm outputs and four non-farm produced inputs, which are traded between these two closely integrated economies. Adherence to the LOP is evaluated by examining the pass-through effects of exchange rate changes on these prices using quarterly data. The sample covers the period of 1975 - 1999, when there were substantial exchange rate movements. Regression and cointegration techniques are utilized to estimate whether and at what rate exchange rate changes are transmitted to prices. The empirical results give rise to supportive evidence in favor of the LOP for the five farm outputs. The evidence is somewhat weaker for three of the four non-farm produced inputs, and the LOP is violated for one input. / Master of Science

Thesis advisor: Fabio Schiantarelli / This dissertation comprises three self-contained essays that investigate how micro-level frictions affect firms’ operational decisions and investors’ behavior, evaluating their respective costs or benefits for the overall economy. In the first chapter, “Customer Capital and The Aggregate Effect of Short-Termism", joint work with M. Errico and A. Lavia, we study the impact of short-termism on firms’ pricing decisions and quantify the potential costs for consumers in term of welfare. Managers face continuous pressure to meet short-term forecasts and targets, which can impact their investment in customer capital and pricing decisions. Using data on U.S. public companies together with IBES analysts’ forecasts, we find that firms that just meet analysts’ profit forecasts have average markup growth of 0.8% higher than firms that just miss targets, suggesting opportunistic markup manipulation. To assess the aggregate economic implications of short-termism, we develop and estimate a quantitative heterogeneous firm model that incorporates short-term frictions and endogenous markups resulting from customer accumulation. In the model, short-termism solves an agency conflict between manager and shareholders, resulting in higher markups and lower customer capital stock. We find that, on average, firms increase markups by 8% due to short-termism, generating $38 million of additional annual profits. At the macro level, the distortion reduces consumers’ welfare by 4% and lowers the total market capitalization by $3.1 trillion on average. In the second chapter, “Strategic Investors and Exchange Rate Dynamics", joint work with M. Errico, we study how the exchange rate dynamics are influenced by the presence of heterogeneous investors with varying degrees of price impact. Leveraging data from the U.S. Commodity Futures Trading Commission (CFTC) on investors’ currency positions, we show that foreign exchange rate markets display a significant level of concentration,and investors’ price impact is stronger in more concentrated markets. We develop a monetary model of exchange rate determination that incorporates heterogeneous investors with different degrees of price impact. We show that the presence of price impact amplifies the exchange rate’s response to non-fundamental shocks while dampening its response to fundamental shocks. As a result, investors’ price impact contributes to the disconnect of exchange rates from fundamentals and the excess volatility of exchange rates. We provide empirical evidence in line with our theoretical predictions, using data on trading volume concentration from the US CFTC foreign exchange rate market for 10 currencies spanning from 2006 to 2016. Additionally, we extend our framework to account for information heterogeneity among investors, which presents a competing dimension of heterogeneity with qualitatively similar implications for exchange rate dynamics. Both dimensions of heterogeneity are quantitatively relevant, with the heterogeneity in price impact accounting for 62% of the additional volatility and 35% of the additional disconnect attributed to investors’ heterogeneity. In the third chapter, “Firms’ Investment and Central Bank Communication: The Role of Financial Heterogeneity", I study how financial frictions impact the transmission of monetary policy to investment. Monetary policy affects firms’ capital investment through two distinct channels: the pure monetary channel, which operates through changes in interest rates, and the information channel, which operates through changes in investors’ beliefs about the economic outlook and future policy rates. I show that the role of financial frictions for monetary policy transmission hinges crucially on specific channel. Using Compustat data, I find that firms with high leverage are more sensitive to pure monetary shocks but are less sensitive to Fed information shocks. Finally, I develop a dynamic general equilibrium model with firm idiosyncratic productivity, real and financial frictions to rationalize the empirical findings and study aggregate implications. / Thesis (PhD) — Boston College, 2024. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

台灣為外貿型及淺碟型經濟體，對外貿易依存度高，故國際匯率之變動對台灣企業之獲利能力影響深遠，而台灣上市櫃公司為台灣企業之縮影，外資持有國內上市櫃公司之市值平均已超過20%以上，國外資金之匯進匯出對股市之報酬亦形成重大之影響，而其匯進/出之誘因就是匯率之變動或預期變動率。本文擬就國內344家上市櫃公司獲利之代理變數個股股價報酬率之匯率暴露及其解釋或決定因子進行迴歸分析研究，發現有61%家數之公司有匯率暴露，且在新台幣實質有效匯率指數與台幣/美元不同匯率變動計算下產生不同結果，前者新台幣之升貶與企業獲利(成反比，而後者新台幣之升貶與企業獲利(或個股報酬率)成正比，前者應為企業外幣報價競爭力增加所致，而後者係國外資金流入/流出之誘因所產生之資金行情(效果)或負效果(無行情)所致。 在解釋或決定此匯率暴露之因子方面，本文嘗試以六個因子股利發放率、長期負債比率、外銷比率、速動比率、淨值市價比與公司規模來對匯率變動率之係數進行迴歸，結果各產業有不同程度之顯著性，某些因子甚至有很大之顯著性。而本文另亦進行共線性與時間落後效果測試與分析，證實前述六因子確實有一半存在彼此之共線性，而在時間落後效果上六因子亦顯示似有落後二期之效果存在。

Notre thèse vise deux domaines inter reliés des marchés taux de change en se référant particulièrement à un marché émergent qui est le Pakistan. Ces domaines sont le rôle et l'efficacité de l'intervention orale sur le marché des changes étrangers et le régime "de facto" adopté par le pays. Nous avons collecté une base de données complète des rapports, des communiqués de presse fournis par des autorités pakistanaises et d'autres informations, qui pourraient affecter le taux de change de la roupie pakistanaise contre le dollar US. Pour étudier l'efficacité de la stratégie d'intervention orale de l'autorité monétaire pakistanaise, nous avons appliqué l'approche d'étude d'évènement couramment utilisée dans la littérature. Nous avons analysé les effets des évènements de l'intervention orale en utilisant un test de signe non-paramétrique basé sur différents critères d'évaluation. Cette efficacité a été observée sur le niveau et la volatilité du taux de change sur le marché de changes officiel. Toutefois, cette thèse présente un aspect intéressant qui concerne le fait que nous avons également examiné les effets des évènements d'une intervention orale sur le prix de change au marché parallèle. L'approche mentionnée ci-dessus a été employée pour examiner les effets de l'intervention orale sur la prime, le taux et la volatilité du marché parallèle. La thèse étudie également le régime de facto du taux de change du Pakistan. Pour étudier le régime de facto du taux de change de ce pays, nous avons utilisé un panier de devises et nous nous sommes placé dans un contexte de "exchange market pressure". Nous avons également examiné l'impact de deux ensembles différents de devises (régional et du Moyen-Orient) sur la roupie pakistanaise. Enfin, le modèle structural de Bai et de Perron a été appliqué pour obtenir la coupure de la série de données de l'échantillon. Les résultats obtenus indiquent que l'intervention orale demeure efficace pour le niveau et la volatilité du taux de change sur le marché de changes officiel. Un résultat intéressant ressort de cette étude qui stipule que les efforts d'une intervention orale sont également réussis; ils permettent d'influencer la prime et la volatilité du marché parallèle dans le sens désiré. La comparaison entre les régimes de change suivis par le pays, de jure ( flottant contrôlé) ou de facto (fixé par rapport au dollar), révèle des disparités pour une grande partie de la période d'étude. / The thesis targets two inter related areas of the foreign exchange market with special references to an emerging economy, Pakistan. These areas are the role and effectiveness of oral intervention in the foreign exchange market and de facto exchange rate regime followed by the country. We collected a comprehensive database of statements, press releases by paskistani authorities and other news, which could affect the exchange rate of the pakistani rupee against the US dollar. We applied the event stydy approach , widely used in the available literature, to investigate the effectiveness of the oral intervention strategy of pakistani monetary authority. We analyzed the effects of the oral intervention events using a non-parametric sign test based on different evaluation criteria. This effectiveness was observed on the exchange rate level and volatility in the official currency market. Whereas, an interesting aspect of the thesis is that we also examined the affects of these oral inetrvention events on the exchange rate of the parallele currency market. The aforementioned approach was used to examined the affects of the oral intervention on the parallel market premium, rate and volatility. The thesis also investigated the de facto exchange rate regime of Pakistan. We used the "currency basket" and "exchange market pressure" framework to investigate the de facto exchange rate regime of the country. The impact of two different sets of currencies (i.e. regional and Middle Eastern) was also observed on the pakistani rupee. Finally, the Bai and Perron structural break model was applied to obtain the break points in the sample data. The results obtained indicate that the oral intervention remained effective for both the exchange rate level and volatility in the official currency market. Interestingly, these oral intervention efforts wrere also successful in influencing the parallel market premium and volatility in the desired direction. Regarding the exchange rate regime followed by the country, a gap was observed in the de jure (managed float) and de facto (dollar peg) exchange rate regime of the country for most part of the sample period covered.

O objetivo da presente dissertação é avaliar a atuação do Banco Central do Brasil no controle do excesso de volatilidade da taxa de câmbio. Para tanto, estima-se um modelo SETAR com dois limiares, com o intuito de identificar uma estrutura não linear na taxa de câmbio e, por meio da proposição de um modelo teórico, avaliar de que forma ocorreria a tomada de decisão acerca de intervenções no mercado de câmbio. Busca-se, também, por meio de simulações do modelo teórico proposto, entender como se relacionariam o comportamento de maior prazo da taxa de câmbio e a política de controle da volatilidade. Conclui-se que períodos marcados por uma tendência de constante depreciação (apreciação) da moeda podem estar relacionados a momentos de redução (acúmulo) de reservas internacionais mantidas pelo Banco Central. / The objective of this dissertation is to evaluate the behavior of the Brazilian Central Bank, in its role of to controling exchange rate excess volatility. A SETAR model with two thresholds is estimated in order to identify a nonlinear structure for the exchange rate. A theoretical model is proposed for the monetary authority in order to evaluated optimal intervention policy. The theoretical model is then simulated to show how long-run trends in the exchange rate could be smoothed by control policies. The results shows that depreciation (appreciation) trends could be related to significant reductions (accumulation) of international reserves.

Made available in DSpace on 2016-04-25T16:44:14Z (GMT). No. of bitstreams: 1 Cassia Regina Vanicola.pdf: 742192 bytes, checksum: 69c4e862cfbce1c13bedea989c483c6a (MD5) Previous issue date: 2010-05-26 / The exchange rate corresponds to one of the main prices of an economy, due to several effects it has the ability to lead: effects on the current account of a country, its impact on monetary policy, on economic growth and effects on business decisions. The purpose of this research is to investigate factors that drive price movements of the national currency - the Real, against the dollar in the United States of America, for the sample period; to select relevant macroeconomic and financial variables and to test them empirically. First, the major theoretical developments of the theme and a brief history of the brazilian and also the world foreign exchange market are described. In this phase of the study there is the option to work with the variables: interest rate differential, country risk premium - EMBI, foreign direct investment - FDI, gross domestic product - GDP Bovespa Index and Dow Jones Index. Based on the sample period from January 1995 to January 2009, period of time in which, despite having an stable economy, Brazil went through several exchange rate regimes: floating exchange rate from 1994 to 1995, managed currency regime from 1995 to 1998; floating exchange rate with devaluation trend of the Real from 1999 to 2002 and floating exchange rate with appreciation trend of the Real from 2003 to 2009, seeks to establish econometric relationships via vector autoregression - VAR modeling. The results show that for the time interval, the main influences on the price development of the national currency are due to the variables: interest rate differential, EMBI, GDP and FDI. Additional discussion leads to the idea that it is still very difficult to predict the evolution of the exchange rate, especially in the short and medium term, and that other approaches such as the use of models for dealing with conditional heteroscedasticity or with microeconomic data may lead to interesting results / A taxa cambial corresponde a um dos principais preços de uma economia, por vários efeitos que tem a capacidade de provocar: efeitos sobre as transações correntes de um país, efeitos sobre a política monetária, efeitos sobre o crescimento econômico e efeitos sobre as decisões empresariais. O objetivo desta pesquisa é o de investigar fatores de relevância para os movimentos do preço da moeda nacional Real com relação ao Dólar dos Estados Unidos da América, para o período da amostra, selecionando variáveis macroeconômicas e financeiras relevantes e testando-as empiricamente. Primeiramente, são descritas as bases teóricas relevantes à evolução do tema, bem como breve histórico do mercado cambial mundial e brasileiro. Nessa fase do estudo opta-se por trabalhar com as variáveis: diferencial de juros, prêmio de risco país - EMBI, investimento direto estrangeiro - IDE, produto interno bruto - PIB, Ibovespa e Dow Jones. Tomando como base amostral o período de janeiro/1995 a janeiro/2009, período que apesar de contar com a estabilidade da economia brasileira, passou por vários regimes cambiais: câmbio flutuante de 1994 a 1995; câmbio administrado de 1995 a 1998; câmbio flutuante com tendência à desvalorização do Real de 1999 a 2002 e câmbio flutuante com tendência à valorização do Real de 2003 a 2009, procura-se estabelecer relações econométricas via modelagem por vetores auto-regressivos VAR, para as variáveis selecionadas. Os resultados das análises mostram que as principais influências à evolução do preço da moeda nacional para o período se devem às variáveis: diferencial de juros, EMBI, PIB e IDE. Discussões adicionais conduzem à idéia de que há ainda grande dificuldade de se prever a evolução da taxa cambial, especialmente no curto e médio prazos, e que outras abordagens tais como o uso de modelos que lidam com heteroscedasticidade condicional ou modelos que trabalhem com dados da microeconomia, possam trazer resultados interessantes

O presente trabalho teve por objetivo investigar se há evidências de que o regime de política cambial brasileiro teria se alterado no pós-crise econômico-financeira internacional de 2008, além de captar insights acerca da eficácia dos instrumentos de intervenção recentemente aplicados sobre o mercado de moedas e acerca do poder explicativo dos fundamentos da taxa de câmbio. Três fatos estilizados do mercado de câmbio brasileiro incitam essa investigação. O primeiro deles encontra-se no histórico de mudanças de regime cambial do Brasil e das demais economias emergentes, as quais geralmente têm ocorrido em momentos de crises internacionais por impossibilidade dos governos em sustentar o regime vigente. O segundo assenta-se na dinâmica recente do real cuja variação tem se descolado da dinâmica das demais moedas commodities currencies. Por fim, o terceiro ponto está nas inovações recentes em política de intervenção das autoridades monetárias e fiscais visando à gestão da cotação da moeda com medidas tais como as modificações das alíquotas do IOF sobre operações cambiais. Para o alcance dos objetivos foi utilizado o modelo Markov Switching desenvolvido por Hamilton (1989) aplicado ao modelo estrutural de curto prazo para taxa de câmbio, no qual foram consideradas como variáveis explicativas os fundamentos e as intervenções na taxa de câmbio descritas na literatura atual. O modelo foi estimado com ambas as variáveis sujeitas a estados não observáveis, cujas probabilidades de ocorrência são geradas por um processo markoviano. Como resultado foi identificado que não há evidências representativas de modificação na dinâmica da taxa de câmbio no pós-crise que conduzam a interpretação de alteração no regime de política cambial adotado pelo Brasil. Verificou-se também que as intervenções das autoridades monetárias e fiscais não obtiveram eficácia em gerir ou direcionar a variação ou nível da moeda. Ademais, a aplicação do modelo de mudança de regime na série da taxa de câmbio permitiu compreender a sua dinâmica no período recente e o modo como os fundamentos e intervenção perdem e ganham influência na determinação da cotação ao longo dos ciclos da moeda. / This study seeks evidences of changes in the Brazilian foreign exchange rate regime after the international economic and financial crisis of 2008. Furthermore, captures insights on the effectiveness of the intervention measures recently applied on the currency market and the explanatory power of the fundamentals of exchange rates. Three particular facts of the Brazilian foreign exchange market stimulated this research. First, the historical changes of foreign exchange rate regimes in Brazil and other emerging economies. Generally, it has occurred in times of international crises due to the failure of governments to sustain the regime. Second, recent deviation of the Real, which has been detached from the dynamics of other commodities currencies. Finally, the third fact is the recent innovations on monetary and fiscal intervention policies by authorities in order to manage currency value, such as adjustments of IOF on foreign exchange transactions. This investigation uses Markov switching model, developed by Hamilton (1989), applied to the structural model for short-term exchange rate, considering the fundamentals and interventions on the exchange rate described in the current literature as explanatory variables. The model was estimated with both variables subjected to unobservable states, whose probabilities of occurrence are generated by a Markov process. As result, there is no significant evidence of changes in the dynamic of exchange rate in the post-crisis that explains changes in foreign exchange rate regimes adopted by Brazil. The intervention by monetary authorities was not efficient in managing or guiding the dynamic of foreign exchange rate. In addition, the application of the Markov switching model in the foreign exchange rate series allowed understanding the dynamics in recent periods and how fundamentals and interventions loses and gain influence in determining prices throughout the currency cycles.

Following the development of international trade, exchange rate uncertainty is a majorsource of risk for corporations involved in international activities. It has forcedmanagers and academics to pay more attention to the effect of exchange rate volatilityon firm value, particularly in developed countries. In the 1990s Asian financial crises,the stock return volatility of US multinational firms increases significantly with therapid expansion of Asian currency crises to world stock market. It led academics andinvestors to pay increasing attention to examine exchange rate exposure in Asia stockmarkets. Nowadays the value of U.S. dollar increased volatility against Asian countries’currency since U.S. financial crisis beginning in August 2007. From what we know, fewof researches report the impact of US financial crisis for Asia firms. This paper aims toexplore the relation between exchange rate movement and firm values in Asian markets. The main purpose of this paper is to examine whether a significant contemporaneousand lagged variability of Asian firms’ stock returns are affected by exchange ratemovement in Asian markets, such as Hong Kong, Singapore, China, Taiwan, andMalaysia during the period from August 2005 to March 2010. Differences of capitalmaturity were compared with among these five Asian economies, covering bothdeveloped markets and emerging markets in Asia. This comparison makes sense tounderstand the efficient market hypothesis theory. In order to ensure our research’svalidity and reliability, sample firms are randomly chosen by the method of stratifiedsampling. The second step in this study is to examine the impact of firm-specific factorson sensitivity to exchange rate movement for those firms with a significant exchangerate exposure. The five firm specific factors are firm size, leverage situation, hedgingactivities, foreign involvement level, and industry classification. The main methods inthis quantitative research are simple and multiple linear regressions. The ordinary leastsquares method in SPSS program was used to estimate the parameters for eachindependent variable. Using a sample of 182 listed firms in these five sample markets, except China,exchange rate exposure of firms in other four Asian markets increases significantly insome sub-period during three sub-periods. After examining the sensitivity to weeklyexchange rate movement of local currency to US Dollar, it is noticeable for academicsthat there is no obvious difference between developed markets and emerging markets inAsia during the period of August 2005 to March 2010. Moreover, the relationshipbetween exchange rate and stock returns varied from markets with respect to exchangerate regimes and level of capital control. As to firm-specific factors, firm size wasnegatively related to exchange rate exposure and this effect was stronger in developedmarkets than other. Similar to previous studies, Asian markets also showed thatexchange rate exposure differed among industries. However, the effect on exchange rateexposure is not significant caused by leverage, foreign sales and hedging activityinvolvement. Suggestions and recommendations for further studies are provided in thelast part of this paper.

Magistro baigiamajame darbe išskirti pagrindiniai fiksuoto valiutos kurso privalumai ir trūkumai, nustatyta jų įtaka Lietuvos ekonomikai bei įvertinta ar Lietuvai yra naudinga bendra valiuta su euro zonos šalimis. Pirmoje darbo dalyje išskiriami pagrindinių valiutos kurso režimų privalumai ir trūkumai, apžvelgiama Lietuvos pinigų politikos raida ir optimalios valiutos zonos teorija. Antroje dalyje remiantis pirmoje dalyje išskirtais fiksuoto valiutos kurso privalumais ir trūkumais analizuojama kaip jie veikė infliaciją, investicijas, užsienio prekybą, einamosios sąskaitos balansą, ar nebuvo grėsmės devalvacijai, ar ECB vykdoma pinigų politika buvo palanki. Trečioje darbo dalyje remiantis optimalios valiutos zonos kriterijais analizuojama ar Lietuva yra OVZ su EU (17) ir ar bendra valiuta – euras būtų naudingas. / In the Master‘s thesis main advantages and disadvantages of Fixed Exchange Rate were distinguished, analyzed their impact on Lithuania‘s economy and evaluated whether a common currency with the euro-zone countries would be useful. In the first part of the paper the main Exchange Rate Regime advantages and disadvantages were identified, main developments of Lithuania’s monetary policy and optimum currency area were overviewed. The impact of fixed exchange rate advantages and disadvantages on indicators such as inflation, foreign direct investment, foreign trade, current account balance were analyzed in the second part of the paper including the analyses of litas devaluation possibility and ECB monetary policy. The third part of the paper aims at assessing whether Lithuania and EU (17) is an OCA and whether a common currency – euro is beneficial.

As décadas de 1990 e 2000 foram marcadas por uma série de crises cambiais e financeiras no mundo, atingindo tanto os países emergentes quantos os países desenvolvidos, causando desajustes estruturais, financeiros e reais, nesses países. Identificar as crises cambiais e financeiras é mais complexo no mundo real do que na teoria, uma vez que os regimes cambiais em geral são flexíveis, mas administrados pelas autoridades monetárias, e as taxa de juros, em um contexto de livre mobilidade de capitais, são bastante voláteis. O objetivo do trabalho é centrar a atenção na condução da política cambial por parte das autoridades monetárias, em especial às dos países emergentes, como estratégia de estabilização dos preços e, marginalmente, de crescimento econômico, levando-se em consideração que uma taxa de câmbio de desequilíbrio tende não somente a afetar a dinâmica de preços e a trajetória de crescimento da atividade econômica, mas, também, a protagonizar desequilíbrios de balanço de pagamentos e, por conseguinte, crises cambiais. Diante deste contexto, procura-se verificar a relação de causalidade entre a volatilidade da taxa de câmbio e algumas variáveis macroeconômicas selecionadas, com o propósito de tentar encontrar elementos comuns que permitam entender os motivos que determinam o surgimento de crises cambiais nos países, independente do regime cambial vigente. Para tanto, torna-se necessário uma análise, através tanto da revisão bibliográfica quanto da estatística-descritiva, do funcionamento do mercado de câmbio, dos modelos de crises cambiais e dos desdobramentos das crises que afetaram os países emergentes, nas décadas de 1990 e 2000. Por fim, analisar os movimentos das variáveis macroeconômicas selecionadas e sua relação com o mercado de câmbio nos permite entender, ou verificar, quais fatores, com ou sem relação direta com os fundamentos macroeconômicos, influenciam a dinâmica econômica e a ocorrência de crises cambiais. / The decades of 1990 and 2000 were marked by a series of exchange rate and financial crises in the world, affecting both emerging and developed countries, and causing structural, financial, and real maladjustments in such countries. Identifying the exchange rate and financial crises is more complex in the real world than it is in theory, since exchange rate regimes in general are flexible, but administered by monetary authorities. In addition, the interest rates, in a context of free capital mobility, are quite volatile. The objective of this paper is to focus the attention on the conduct of the exchange rate policy by the monetary authorities, particularly those in emerging countries, as a strategy for the stabilization of prices and, to a smaller extent, of economic growth, taking into consideration that an imbalanced exchange rate tends not only to affect the price dynamics and the growth path of economic activity, but also to bring about disequilibria in balance of payments, and, as a consequence, exchange rate crises. In light of this context, it seeks to check whether there is a causal link between the volatility of the exchange rate and some selected macroeconomic variables, with a view to seeking common elements that enable an understanding of the reasons that determine the emergence of exchange rate crises in the countries, regardless of the existing exchange rate regime. To this end, it is necessary to carry out analysis, both through bibliographic review and descriptive statistics, of the functioning of the exchange market, of the currency crisis models, and of the outcomes of the crises that affected emerging countries in the decades of 1990 and 2000. Finally, analyzing the movements of the selected macroeconomic variables and their relation to the exchange market enables us to understand, or verify, which factors – either directly related to the macroeconomic fundamentals or not – influence the economic dynamics and the occurrence of exchange rate crises.