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Is the Exchange Rate Predictable in the Long-Run?

Author

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  • Soowon Mo

    (Mokpo National University)

  • Wookil Cho

    (Sooncheon National University)

Abstract

The short-run and long-run forecasts of exchange rates based on the three structural models are compared to those based on the random walk model. The long—run forecasts are generated by the error—correction equations of the Johansen's multivariate cointegration technique. The results show that while the random walk model outperforms the structural models in the short—run forecasting, the structural models outperform the random walk in the long—run forecasting. Our results indicate that the monetary models should be thought more of as the long—run models.

Suggested Citation

  • Soowon Mo & Wookil Cho, 1994. "Is the Exchange Rate Predictable in the Long-Run?," Korean Economic Review, Korean Economic Association, vol. 10, pages 207-227.
    • Handle: RePEc:kea:keappr:ker-199412-10-1-12
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