In recent years there has been a considerable development in modelling nonlinearities and asymmetries in economic and financial variables. The aim of this work is to compare the forecasting performance of different models for the returns of some of the most traded exchange rates in terms of the US dollar, namely the French Franc (FF/$), the German Mark (DM/$) and the Japanese Yen (Y/$). We compare the relative performance of some nonlinear models and contrast them with their linear counterparts. Although we find evidence of some forecasting gains from nonlinear models, the results are sensitive to the forecast horizon and to the metric adopted to measure the forecasting accuracy. The use of data at different frequencies allows us to evaluate the possible effects of temporal aggregation.
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Paper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number
200014.
Find related papers by JEL classification: C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation
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