An Analysis of Thai Baht Exchange Rate by Common Factor Model

  • Supanee Harnphattananusorn Kasetsart University
Keywords: Exchange Rate, Common Factor Model, Fundamental Macro Model


The objective of the research is to find the model for explaining the Thai baht exchange rate against the US dollar. The data used in the study are monthly data from 1990 to 2017. The common factor model is used to extract common factors embedded on movements of a set of 18 countries exchange rates. Then we use selected observable global factors to identify the economic interpretation to the extracted factors. Finally, the common factors are used to describe the rate of change of the exchange rate. The results show that the inclusion of the common factors to the fundament macroeconomics model improves the predictability of the rate of change of Thai Baht exchange rate.


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