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Econometric Modelling of the Sterling Effective Exchange Rate

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  • James E. H. Davidson

Abstract

The exchange rate is recognised as a particularly tricky subject for modelling and prediction. The problems of unobservables such as expectations, of simultaneity, and of policy changes (both overt and covert) in the sample period to which models must be fitted may account for the disappointing results of recent attempts to test theories of exchange rate determination. This paper develops an appropriate empirical model to deal with these problems; it allows consideration of the proper interpretation of theoretical assumptions and determination of how far modelling for ex ante prediction can succeed.

Suggested Citation

  • James E. H. Davidson, 1985. "Econometric Modelling of the Sterling Effective Exchange Rate," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(2), pages 231-240.
    • Handle: RePEc:oup:restud:v:52:y:1985:i:2:p:231-240.
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    File URL: http://hdl.handle.net/10.2307/2297619
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    Cited by:

    1. Hernán Rincón, 2000. "Efectividad del control a los flujos de capital: Un reexamen empírico de la experiencia reciente en Colombia," Revista de Economía del Rosario, Universidad del Rosario, February.
    2. Caporale, Guglielmo Maria & Kalyvitis, Sarantis & Pittis, Nikitas, 2001. "Testing for PPP and UIP in an FIML framework: Some evidence for Germany and Japan," Journal of Policy Modeling, Elsevier, vol. 23(6), pages 637-650, August.
    3. Lin, Yan-Xia & McCrae, Michael & M. Gulati, Chandra, 1998. "Cointegration between exchange rates: a generalized linear cointegration model," Journal of Multinational Financial Management, Elsevier, vol. 8(2-3), pages 333-352, September.

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