Can Political Variables Really Predict Exchange Rate Movements?
AbstractThis paper argues that Blomberg and Hess's (Journal of International Economics 1997) finding that political variables can be used to predict exchange rate movements better than the random walk model must be seen in the context of the decade and half of previous research which failed to beat this benchmark. This paper uses White's "Reality Check" methodology to test whether political variables remain as significant predictors of the exchange rate when a host of alternative competing models are taken into account. It finds that they do not.
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Bibliographic InfoPaper provided by Wellesley College - Department of Economics in its series Papers with number 99-10.
Length: 17 pages
Date of creation: 1999
Date of revision:
EXCHANGE RATE ; FORECASTS ; FINANCIAL MARKET;
Other versions of this item:
- S. Brock Blomber & Andrew Mountford, 2000. "Can Political Variables Really Predict Exchange Rate Movements?," Royal Holloway, University of London: Discussion Papers in Economics 99/11, Department of Economics, Royal Holloway University of London, revised Feb 2000.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- H8 - Public Economics - - Miscellaneous Issues
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