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Empirical Exchange Rate Models of the Nineties

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Author Info

  • Yin-Wong Cheung
  • Antonio Garcia Pascual
  • Menzie David Chinn

Abstract

We reassess exchange rate prediction using a wider set of models that have been proposed in the last decade. The performance of these models is compared against two reference specifications-purchasing power parity and the sticky-price monetary model. The models are estimated in first-difference and error-correction specifications, and model performance is evaluated at forecast horizons of 1, 4, and 20 quarters, using the mean squared error, direction of change metrics, and the "consistency" test of Cheung and Chinn (1998). Overall, model/specification/currency combinations that work well in one period do not necessarily work well in another period.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 04/73.

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Length: 37
Date of creation: 01 Apr 2004
Date of revision:
Handle: RePEc:imf:imfwpa:04/73

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Related research

Keywords: Exchange rates; Productivity; Purchasing power parity; Monetary measures; Interest rates; Forecasting models; exchange rate; forecasting; random walk; statistic; statistics; cointegration; prediction; predictions; equation; predictability; dollar exchange rate; equilibrium exchange rate; dollar-yen exchange rate; equations; samples; real exchange rate; significance level; exchange rate determination; foreign exchange; exchange rate behavior; covariance; spot exchange rate; exchange rate forecasting; financial statistics; exchange rate movement; exchange rate dynamics; real exchange rates; log exchange rate; standard error; currency appreciation; flexible exchange rates; floating exchange rates; exchange rate levels; nominal exchange rate; foreign exchange markets; finite sample; general equilibrium models; instrumental variables; exchange rate misalignment; correlation; granger causality; autocorrelation; statistical significance; dollar-yen exchange rates; econometrics; exchange markets; nominal exchange rates; standard deviation; sample mean; absolute error; binomial distribution; mean square; consistent estimate; exchange rate economics; spot exchange rates; exchange rate change; exchange rate data;

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References

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  1. Osborne's bet on Mundell-Fleming
    by chris dillow in Stumbling and Mumbling on 2013-03-13 13:27:19
  2. Forecasting Currency Exchange Rates
    by Clive Jones in Business Forecasting on 2013-04-12 21:24:04
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