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On the predictibility of the exchange rate behaviour: An application of Lucas' Model to the Spanish case/¿Es posible predecir el comportamiento del tipo de cambio? Una aplicación del modelo de Lucas al caso español

Author

Listed:
  • BARBERÁ DE LA TORRE, RAFAEL ANTONIO

    () (Departamento de Economía Aplicada I. Universidad Rey Juan Carlos.)

  • DONCEL PEDRERA, LUIS MIGUEL

    () (Departamento de Economía Aplicada I. Universidad Rey Juan Carlos.)

  • SAINZ GONZÁLEZ, JORGE

    () (Departamento de Economía Aplicada I. Universidad Rey Juan Carlos.)

Abstract

The goal of every investment is to obtain maximum return with minimum risk. Foreign exchange risk could cause that a portfolio return differs from the fundamentals of the assets which composes it. In this paper we study, by using the calibration method, the behaviour and size of the spot, forward exchange rate and forward premium for the Spanish market in a general equilibrium model. This research considers different risk aversion coeffi cients, opening levels in the economy and subjective discount factors. Results replicate closely the actual exchange rate behaviour in the long run. El objetivo de toda inversión es lograr la mayor rentabilidad con el menor riesgo posible. El riesgo por tipo de cambio puede provocar que el rendimiento de una cartera de inversión esté desvirtuado con relación a los fundamentos económicos de los activos que componen dicha cartera. En este trabajo, por medio de la aplicación de la técnica de la calibración, se estudia la cuantía y el comportamiento de los tipos de cambio al contado, plazo y la prima de riesgo del mercado español en un modelo de equilibrio general. El análisis se efectúa para distintos grados de aversión al riesgo, de apertura de la economía y factores de descuento subjetivos de los individuos. Las predicciones obtenidas consiguen unos resultados muy positivos al recoger el comportamiento del tipo de cambio con un horizonte temporal de largo plazo.

Suggested Citation

  • Barberá De La Torre, Rafael Antonio & Doncel Pedrera, Luis Miguel & Sainz González, Jorge, 2006. "On the predictibility of the exchange rate behaviour: An application of Lucas' Model to the Spanish case/¿Es posible predecir el comportamiento del tipo de cambio? Una aplicación del modelo de Lucas a," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 24, pages 427-452, Abril.
  • Handle: RePEc:lrk:eeaart:24_1_14
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    References listed on IDEAS

    as
    1. Kling, John L, 1987. "Predicting the Turning Points of Business and Economic Time Series," The Journal of Business, University of Chicago Press, vol. 60(2), pages 201-238, April.
    2. Wecker, William E, 1979. "Predicting the Turning Points of a Time Series," The Journal of Business, University of Chicago Press, vol. 52(1), pages 35-50, January.
    3. Artis, Michael J & Kontolemis, Zenon G & Osborn, Denise R, 1997. "Business Cycles for G7 and European Countries," The Journal of Business, University of Chicago Press, vol. 70(2), pages 249-279, April.
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    5. Watson, Mark W, 1994. "Business-Cycle Durations and Postwar Stabilization of the U.S. Economy," American Economic Review, American Economic Association, pages 24-46.
    6. Canova, Fabio, 1994. "Detrending and turning points," European Economic Review, Elsevier, vol. 38(3-4), pages 614-623, April.
    7. Chaffin, Wilkie W. & Talley, Wayne K., 1989. "Diffusion indexes and a statistical test for predicting turning points in business cycles," International Journal of Forecasting, Elsevier, vol. 5(1), pages 29-36.
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    More about this item

    Keywords

    Exchange rates; Asset pricing; Risk premium; Calibration/Tipos de cambio; valoración de activos; prima de riesgo; calibración;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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