Can the Markov switching model forecast exchange rates?
AbstractA Markov-switching model is fit for eighteen exchange rates at quarterly and monthly frequencies. This model fits well in-sample at the quarterly frequency for many exchange rates. By the mean-squared-error or mean-absolute-error criterion. the Markov model does not generate superior forecasts at a random walk or at the forward rate. There appears to be some evidence that the forecast of the Markov model are superior at predicting the direction of change of the exchange rate.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Kansas City in its series Research Working Paper with number 91-04.
Date of creation: 1991
Date of revision:
Other versions of this item:
- Engel, Charles, 1994. "Can the Markov switching model forecast exchange rates?," Journal of International Economics, Elsevier, vol. 36(1-2), pages 151-165, February.
- Charles Engel, 1994. "Can the Markov Switching Model Forecast Exchange Rates?," NBER Working Papers 4210, National Bureau of Economic Research, Inc.
- F31 - International Economics - - International Finance - - - Foreign Exchange
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