Using ARIMA Forecasts to Explore the Efficiency of the Forward Reichsmark Market: Austria-Hungary, 1876-1914
AbstractWe explore the efficiency of the forward Reichsmark market in Vienna between 1876 and 1914. We estimate ARIMA models of the spot exchange rate in order to forecast the one-month-ahead spot rate. In turn we compare these forecasts to the contemporaneous forward rate, i.e., the market's forecast of the future spot rate. We find that shortly after the introduction of a “shadow” gold standard in the mid-1890s the forward rate became a considerably better predictor of the future spot rate than during the prior flexible exchange rate regime. Between 1907 and 1914 forecast errors were between a half and one-fourth of their pre-1896 level. This implies that the Austro-Hungarian Bank's policy of defending the gold value of the currency was successful in improving the efficiency of the foreign exchange market.
Download InfoIf 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.
Bibliographic InfoPaper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 1244.
Date of creation: Nov 2006
Date of revision:
exchange rate; gold standard; ARIMA; efficiency;
Other versions of this item:
- John Komlos & Marc Flandreau, 2006. "Using ARIMA Forecasts to Explore the Efficiency of the Forward Reichsmark Market: Austria-Hungary, 1876-1914," Historical Social Research (Section 'Cliometrics'), Association Française de Cliométrie (AFC), vol. 31(3), pages 253-262.
- Marc Flandreau & John Komlos, 2003. "Using ARIMA Forecasts to Explore the Efficiency of the Forward Reichsmark Market : Austria-Hungary, 1876-1914," Sciences Po publications nÂ°2002-04, Sciences Po.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- N23 - Economic History - - Financial Markets and Institutions - - - Europe: Pre-1913
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-25 (All new papers)
- NEP-FOR-2006-11-25 (Forecasting)
- NEP-HIS-2006-11-25 (Business, Economic & Financial History)
- NEP-IFN-2006-11-25 (International Finance)
- NEP-MON-2006-11-25 (Monetary Economics)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral 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: (Alexandra Frank).
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.