The out-of-sample success of term structure models as exchange rate predictors: a step beyond
UNSPECIFIED (2003) The out-of-sample success of term structure models as exchange rate predictors: a step beyond. In: Conference on Empirical Exchange Rate Models, MADISON, WISCONSIN, SEP 28-29, 2001. Published in: JOURNAL OF INTERNATIONAL ECONOMICS, 60 (1). pp. 61-83.Full text not available from this repository.
Official URL: http://dx.doi.org/10.1016/S0022-1996(02)00059-4
A large literature suggests that standard exchange rate models cannot outperform a random walk forecast and that the forward rate is not an optimal predictor of the spot rate. However, there is evidence that the term structure of forward premia contains valuable information for forecasting future spot exchange rates and that exchange rate dynamics display nonlinearities. This paper proposes a term-structure forecasting model of exchange rates based on a regime-switching vector equilibrium correction model which is novel in this context. Our model significantly outperforms both a random walk and, to a lesser extent, a linear term-structure vector equilibrium correction model for four major dollar rates across a range of horizons. (C) 2002 Elsevier Science B.V. All rights reserved.
|Item Type:||Conference Item (UNSPECIFIED)|
|Subjects:||H Social Sciences > HC Economic History and Conditions|
|Journal or Publication Title:||JOURNAL OF INTERNATIONAL ECONOMICS|
|Publisher:||ELSEVIER SCIENCE BV|
|Number of Pages:||23|
|Page Range:||pp. 61-83|
|Title of Event:||Conference on Empirical Exchange Rate Models|
|Location of Event:||MADISON, WISCONSIN|
|Date(s) of Event:||SEP 28-29, 2001|
Actions (login required)