fxregime

Various Tools for Exchange Rate Regime Classification

Description

Tools for exchange rate regime classification, currently under development.

Usage

  fxpegtest(model, peg = NULL, ...)

Arguments

model an object of class “fxlm” as returned by fxlm.

peg character with the name of the currency the target currency is pegged to. By default this is chosen to be the currency with the maximal absolute coefficient.

… arguments passed to linearHypothesis.

Details

These tools should help to automate exchange rate regime classification.

The first building block is the function fxpegtest, a simple convenience interface to linearHypothesis. It assess the null hypothesis that only the peg currency has coefficient 1 and all other currencies have coefficient 0.

References

Shah A., Zeileis A., Patnaik I. (2005), What is the New Chinese Currency Regime?, Report 23, Department of Statistics and Mathematics, Wirtschaftsuniversitaet Wien, Research Report Series, November 2005. https://epub.wu.ac.at.

Zeileis A., Shah A., Patnaik I. (2010), Testing, Monitoring, and Dating Structural Changes in Exchange Rate Regimes, Computational Statistics and Data Analysis, 54(6), 1696–1706. doi:10.1016/j.csda.2009.12.005.

Examples

library("fxregime")

## load package and data
library("fxregime")
data("FXRatesCHF", package = "fxregime")

## compute returns for CNY (and explanatory currencies)
## after abolishing fixed USD regime until end of 2005
cny <- fxreturns("CNY", frequency = "daily",
  start = as.Date("2005-07-25"), end = as.Date("2005-12-31"),
  other = c("USD", "JPY", "EUR", "GBP"))

## estimate full-sample exchange rate regression model
fm <- fxlm(CNY ~ USD + JPY + EUR + GBP, data = cny)

## check for plain USD peg:
fxpegtest(fm)

Wald test for pegged FX regime

Model 1: CNY ~ USD + JPY + EUR + GBP
Model 2: CNY ~ USD (fixed = 1)

  Res.Df      RSS Df  Sum of Sq      F Pr(>F)
1    108 0.068387                            
2    104 0.067570  4 0.00081633 0.3141  0.868

## no deviation from a plain USD peg