Exchange Rates Predictability in Developing Countries

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Exchange Rates Predictability in Developing Countries

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Sarmidi, Tamat

Abstract

The main objective of this study is to re-investigates the exchange rates predictability puzzle using monetary model. It is hypothesised that the performance of exchange rate predictability is better off in countries with monetary instability. We employ bootstrap technique as proposed by Kilian (1999) to alleviate statistical inference intricacies inherit in the long horizon forecasting for three different monetary models (flexible price, sticky price and relative price) for selected developing economies. The empirical result shows the superiority of sticky price model along with the evidence of exchange rate predictability for high inflation economies.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16580.

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Date of creation: 22 Jan 2008
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Handle: RePEc:pra:mprapa:16580

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Find related papers by JEL classification:
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications
F31 - International Economics - - International Finance - - - Foreign Exchange

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Other versions:
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