Economic bulletin

This paper reports new findings on exchange rate dynamics concerning whether non-parity fundamentals and parity factors affect exchange rates within a group of trade-related emerging countries: non-parity fundamentals suggested by economic theories have yet been systematically related to exchange rates. We use high and low-frequency multi-country pooled time series panel data approach. The evidence that emerges from this paper is that non-parity factors are significant contributors to exchange rates. These new findings on other-than-parity fundamentals add to a richer understanding of exchange rate behavior as well as clarifying why existing findings are mixed.