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Forecasting real exchange rate trends using age structure data - the case of Sweden

  • Andreas Andersson
  • Par Osterholm

Theory predicts that life cycle saving and consumption behaviour could cause real exchange rate variations as the age structure varies. Time series regressions show that the Swedish demographic structure has significant explanatory power on the real exchange rate during 1960 to 2002. A model using age shares as regressors is used for medium-term out-of-sample forecasts, which perform well both compared to naive forecasts and forecasts based on an autoregressive model.

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Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 12 (2005)
Issue (Month): 5 ()
Pages: 267-272

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Handle: RePEc:taf:apeclt:v:12:y:2005:i:5:p:267-272
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  1. Ray C. Fair & Kathryn M. Dominguez, 1987. "Effects of the Changing U.S. Age Distribution on Macroeconomic Equations," NBER Working Papers 2280, National Bureau of Economic Research, Inc.
  2. McMillan, Henry M. & Baesel, Jerome B., 1990. "The macroeconomic impact of the baby boom generation," Journal of Macroeconomics, Elsevier, vol. 12(2), pages 167-195.
  3. Sarno, Lucio & Taylor, Mark P, 1997. "The Behaviour of Real Exchange Rates During the Post-Bretton Woods Period," CEPR Discussion Papers 1730, C.E.P.R. Discussion Papers.
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  7. Lindh, Thomas, 1999. "Medium-Term Forecasts of Potential GDP and Inflation Using Age Structure Information," Working Paper Series 99, Sveriges Riksbank (Central Bank of Sweden).
  8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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