Can Affine Term Structure Models Help Us Predict Exchange Rates?
AbstractThe author proposes an arbitrage-free model of the joint behaviour of interest and exchange rates whose exchange rate forecasts outperform those produced by a random-walk model, a vector autoregression on the forward premiums and the rate of depreciation, and the standard forward premium regression. In addition, the model is able to reproduce the forward premium puzzle.
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 06-27.
Length: 50 pages
Date of creation: 2006
Date of revision:
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Exchange rates; Interest rates; Econometric and statistical methods;
Other versions of this item:
- Antonio Diez De Los Rios, 2009. "Can Affine Term Structure Models Help Us Predict Exchange Rates?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(4), pages 755-766, 06.
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-05 (All new papers)
- NEP-ETS-2006-08-05 (Econometric Time Series)
- NEP-FIN-2006-08-05 (Finance)
- NEP-FMK-2006-08-05 (Financial Markets)
- NEP-FOR-2006-08-05 (Forecasting)
- NEP-IFN-2006-08-05 (International Finance)
- NEP-MAC-2006-08-05 (Macroeconomics)
- NEP-MON-2006-08-05 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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