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The Won/Dollar Exchange Rate Forecasting Models of the 1990s: Long Horizon Regression with Time Varying Coefficients

Author

Listed:
  • Yeonho Lee

    (Chungbuk National University)

  • Doo-Yull Choi

    (Korea Economic Research Institute)

Abstract

This study is concerned with the prediction of the won/dollar exchange rate using time varying coeflicient co-integrating models incorporated into long horizon regression. The bootstrapping result shows some predictable components in the won/dollar exchange rate. As the forecast horizon is set at longer periods of time, the time varying coeflicient exchange rate determination models generally yield better forecast performances than the ï¬ xed coeï¬ icient model, outperforming the random walk model. These results have been most apparent in the models composed only of Korea ’s macroeconomic variables, instead of the stylized monetary models composed of both US and Korean variables. However, including ï¬ xed exchange rate period data brings about a deterioration in forecast performance.

Suggested Citation

  • Yeonho Lee & Doo-Yull Choi, 1998. "The Won/Dollar Exchange Rate Forecasting Models of the 1990s: Long Horizon Regression with Time Varying Coefficients," Korean Economic Review, Korean Economic Association, vol. 14, pages 361-383.
    • Handle: RePEc:kea:keappr:ker-199812-14-2-08
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    More about this item

    Keywords

    Exchange Rate Prediction; Long Horizon Regression with Time Varying Coefficients;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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