Advanced Search
MyIDEAS: Login

Forecasting the Dollar/Euro Exchange Rate: Can International Parities Help?

Contents:

Author Info

  • Simón Sosvilla-Rivero
  • Emma García

Abstract

In this paper we assess the empirical relevance of an expectations version of Purchasing Power Parity in forecasting the Dollar/Euro exchange rate. This version is based on the Uncovered Interest Rate Parity and tbe Fisher Hypothesis, and it makes use of the differentials of inflation expectations derived from inflation-indexed bonds for the Euro area and the USA. Using the longest available daily data for both the Dollar/Euro exchange rate and for the inflation expectations, our results suggest that, with few exceptions, our predictors behave significantly better than a random walk in forecasts up to five days, both in terms of prediction errors and in directional forecast.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://documentos.fedea.net/pubs/dt/2003/dt-2003-15.pdf
Download Restriction: no

Bibliographic Info

Paper provided by FEDEA in its series Working Papers with number 2003-15.

as in new window
Length:
Date of creation:
Date of revision:
Handle: RePEc:fda:fdaddt:2003-15

Contact details of provider:
Web page: http://www.fedea.net

Related research

Keywords:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Chinn, Menzie D. & Meese, Richard A., 1995. "Banking on currency forecasts: How predictable is change in money?," Journal of International Economics, Elsevier, vol. 38(1-2), pages 161-178, February.
  2. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-44, January.
  3. Cheung, Yin-Wong & Chinn, Menzie & Garcia Pascual, Antonio, 2003. "Empirical Exchange Rate Models of the Nineties: Are Any Fit to Survive?," Santa Cruz Center for International Economics, Working Paper Series qt5fc508pt, Center for International Economics, UC Santa Cruz.
  4. Jeffrey M. Wrase, 1997. "Inflation-indexed bonds: how do they work?," Business Review, Federal Reserve Bank of Philadelphia, issue Jul, pages 3-16.
  5. Boothe, Paul & Glassman, Debra, 1987. "Comparing exchange rate forecasting models : Accuracy versus profitability," International Journal of Forecasting, Elsevier, vol. 3(1), pages 65-79.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fda:fdaddt:2003-15. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carmen Arias).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.