Real shocks dominate exchange rate fluctuations, challenging traditional monetary policy measures.
The article examines how real and nominal shocks affect exchange rates in Thailand during an economic crisis. By using a vector autoregression model, the researchers found that real shocks had a stronger impact on exchange rate fluctuations than nominal shocks. This suggests that economic fundamentals play a significant role in determining exchange rate changes, rather than just monetary policy. The study highlights the importance of understanding and managing real shocks to stabilize exchange rates in the long term.