We use a novel approach to identify economic developments that drive exchange rates in the long run. Using a panel of six quarterly U.S. bilateral real exchange rates Australia, Canada, the euro, Japan, New Zealand and the United Kingdom over the 1980-2007 period, a dynamic factor model points...

We estimate two new equations for Canadian non-commodity exports (NCX) that incorporate three important changes relative to the current equation used at the Bank of Canada. First, we develop two new foreign activity measures (FAMs), which add new components to the FAM currently used at the Bank...