IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Structural Models vs Random Walk: The Case of the Lira/$ Exchange Rate

  • Giancarlo Gandolfo

    (University of Rome, La Sapienza)

  • Pietro Carlo Padoan

    (University of Urbino)

  • Giovanna Paladino

    (University of Rome, La Sapienza)

After presenting the structural models of exchange-rate determination, the authors show that their out-of-sample predictive performance of the lira/$ exchange rate is inferior to that of the random walk model. Only by moving away from these single-equation, semireduced form models toward suitable economywide macroeconometric models can one hope to beat the random walk. Following this course, the authors show that the Mark V version of their continuous time macroeconometric model of the Italian economy outperforms both the existing structural models and the random-walk process in out-of-sample forecasting tests of the lira/$ exchange rate.

If 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.

File URL:
Download Restriction: no

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 16 (1990)
Issue (Month): 2 (Apr-Jun)
Pages: 101-113

in new window

Handle: RePEc:eej:eeconj:v:16:y:1990:i:2:p:101-113
Contact details of provider: Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
Phone: (201) 684-7346
Web page:

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
  2. Bilson, John F O, 1978. "The Current Experience with Floating Exchange Rates: An Appraisal of the Monetary Approach," American Economic Review, American Economic Association, vol. 68(2), pages 392-97, May.
  3. Peter Isard, 1987. "Lessons from Empirical Models of Exchange Rates (Enseignements tirés des modèles empiriques de comportement des taux de change) (Enseñanzas que nos brindan los modelos empíricos de tipos de cambio," IMF Staff Papers, Palgrave Macmillan, vol. 34(1), pages 1-28, March.
  4. Somanath, V. S., 1986. "Efficient exchange rate forecasts: Lagged models better than the random walk," Journal of International Money and Finance, Elsevier, vol. 5(2), pages 195-220, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eej:eeconj:v:16:y:1990:i:2:p:101-113. See general 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: (Victor Matheson, College of the Holy Cross)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.