Using ARIMA Forecasts to Explore the Efficiency of the Forward Reichsmark Market
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 8.
Date of creation: Mar 2002
Date of revision:
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- N32 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: 1913-
This paper has been announced in the following NEP Reports:
- NEP-ETS-2003-07-10 (Econometric Time Series)
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.:
- Marc Flandreau & John Komlos, 2001.
"How to Run a Target Zone? Age Old Lessons from an Austro-Hungarian Experiment,"
CESifo Working Paper Series
556, CESifo Group Munich.
- John Komlos & Marc Flandreau, 2001. "How to Run a Target Zone ? Age Old Lessons from an Austro-Hungarian Experiment," Sciences Po publications nÂ°556, Sciences Po.
- repec:spo:wpecon:info:hdl:2441/323 is not listed on IDEAS
- John Komlos & Marc Flandreau, . "Core or Periphery? The Credibility of the Austro-Hungarian Currency, 1867-1913," Articles by John Komlos 4, Department of Economics, University of Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alexandra Frank).
If references are entirely missing, you can add them using this form.