Using ARIMA Forecasts to Explore the Efficiency of the Forward Reichsmark Market: Austria-Hungary, 1876-1914
AbstractWe explore the efficiency of the forward Reichs¬mark market in Vienna between 1876 and 1914. We esti¬mate ARIMA models of the spot exchange rate in order to forecast the one-month-ahead spot rate. In turn we compare these forecasts to the contemporaneous forward rate, i.e., the market’s forecast of the future spot rate. We find that shortly after the introduction of a “shadow” gold standard in the mid-1890s the forward rate became a considerably bet¬ter predictor of the future spot rate than during the prior flexible exchange rate regime. Between 1907 and 1914 forecast errors were between a half and one-fourth of their pre-1896 level. This implies that the Austro-Hungarian Bank’s policy of defending the gold value of the currency was successful in improving the efficiency of the foreign exchange market.
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Bibliographic InfoArticle provided by Association Française de Cliométrie (AFC) in its journal Historical Social Research (Section 'Cliometrics').
Volume (Year): 31 (2006)
Issue (Month): 3 ()
Other versions of this item:
- Marc Flandreau & John Komlos, 2003. "Using ARIMA Forecasts to Explore the Efficiency of the Forward Reichsmark Market : Austria-Hungary, 1876-1914," Sciences Po publications nÂ°2002-04, Sciences Po.
- Komlos, John & Flandreau, Marc, 2006. "Using ARIMA Forecasts to Explore the Efficiency of the Forward Reichsmark Market: Austria-Hungary, 1876-1914," Discussion Papers in Economics 1244, University of Munich, Department of Economics.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- N32 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: 1913-
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