{
  "title": "Soft Power and Exchange Rate Volatility",
  "publication": "IMF Working Papers, March 20, 2015",
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  "summary": "Standard models—based exclusively on macro-financial variables—have made little progress in explaining the behavior of exchange rates.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Standard models based exclusively on macro-financial variables have made little progress in explaining the behavior of exchange rates.\n- This paper introduces a set of “soft power” factors capturing a country’s demographic, institutional, political and social underpinnings to uncover determinants of exchange rate volatility over time and across countries.\n- Empirical results are based on a balanced panel dataset comprising 115 countries during the period 1996–2011."
    },
    {
      "heading": "Data and Methodology",
      "content": "- Dataset: balanced panel of 115 countries, period 1996–2011.\n- Estimation: results are generally robust across different estimation methodologies.\n- Duration/length: Pages: 35; Volume: 2015; Issue: 063; Series: Working Paper No. 2015/063; Stock No: WPIEA2015063; DOI: https://doi.org/10.5089/9781475530520.001; ISBN: 9781475530520; ISSN: 1018-5941."
    },
    {
      "heading": "Key Findings",
      "content": "- High degree of persistence in exchange rate volatility, especially in emerging market economies.\n- After controlling for standard macroeconomic factors, the following “soft power” variables have a statistically significant influence on the level of exchange rate volatility across countries:\n  - an index of voice and accountability\n  - life expectancy\n  - educational attainment\n  - the z-score of banks\n  - the share of agriculture relative to services"
    },
    {
      "heading": "Implications and Analysis",
      "content": "- Incorporating demographic, institutional, political and social variables (the “soft power” factors) helps explain cross-country and over-time variation in exchange rate volatility that macro-financial models alone have not captured.\n- The persistence of volatility suggests that country-specific structural and institutional features matter for exchange-rate dynamics, with particular relevance for emerging market economies.\n\nSerhan Cevik, Richard Harris, and Fatih Yilmaz. \"Soft Power and Exchange Rate Volatility\", IMF Working Papers 2015, 063 (2015), accessed 9/11/2026, https://doi.org/10.5089/9781475530520.001\n\n---\n\n Content in this bundle\n\n- 1.   Exchange Rate Volatility\n  - 1.   Exchange Rate Volatility (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 1.   Exchange Rate Volatility (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/soft-power-and-exchange-rate-volatility-42795"
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    "Authors: Serhan Cevik, Richard Harris, Fatih Yilmaz",
    "Published: March 20, 2015",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781475530520.001",
    "Standard models based exclusively on macro-financial variables have made little progress in explaining the behavior of exchange rates.",
    "This paper introduces a set of “soft power” factors capturing a country’s demographic, institutional, political and social underpinnings to uncover determinants of exchange rate volatility over time and across countries.",
    "Empirical results are based on a balanced panel dataset comprising 115 countries during the period 1996–2011.",
    "Dataset: balanced panel of 115 countries, period 1996–2011.",
    "Estimation: results are generally robust across different estimation methodologies.",
    "Duration/length: Pages: 35; Volume: 2015; Issue: 063; Series: Working Paper No. 2015/063; Stock No: WPIEA2015063; DOI: https://doi.org/10.5089/9781475530520.001; ISBN: 9781475530520; ISSN: 1018-5941.",
    "High degree of persistence in exchange rate volatility, especially in emerging market economies.",
    "After controlling for standard macroeconomic factors, the following “soft power” variables have a statistically significant influence on the level of exchange rate volatility across countries:",
    "Incorporating demographic, institutional, political and social variables (the “soft power” factors) helps explain cross-country and over-time variation in exchange rate volatility that macro-financial models alone have not captured.",
    "The persistence of volatility suggests that country-specific structural and institutional features matter for exchange-rate dynamics, with particular relevance for emerging market economies.",
    "**1.   Exchange Rate Volatility**"
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