On Fundamentals And Exchange Rates: A Casselian Perspective
Using an expanded version of the purchasing-power-parity condition we construct simultaneous equation models for three key exchange rates which incorporate meaningful long-run equilibrium relationships and complex short-run dynamics. We show that fully dynamic out-of-sample forecasts from these models are capable of significantly outperforming those of a random walk model over horizons as short as 3 months, and that they are also more accurate than the vast majority of professional forecasts. © 1997 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
Volume (Year): 79 (1997)
Issue (Month): 4 (November)
|Contact details of provider:|| Web page: http://mitpress.mit.edu/journals/|
|Order Information:||Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535|
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.:
- Chinn, Menzie D. & Meese, Richard A., 1995. "Banking on currency forecasts: How predictable is change in money?," Journal of International Economics, Elsevier, vol. 38(1-2), pages 161-178, February.
- Cheung, Yin-Wong & Lai, Kon S., 1993. "Long-run purchasing power parity during the recent float," Journal of International Economics, Elsevier, vol. 34(1-2), pages 181-192, February.
- Charles Engel, 1992.
"Can the Markov Switching Model Forecast Exchange Rates?,"
NBER Working Papers
4210, National Bureau of Economic Research, Inc.
- Engel, Charles, 1994. "Can the Markov switching model forecast exchange rates?," Journal of International Economics, Elsevier, vol. 36(1-2), pages 151-165, February.
- Charles Engel, 1991. "Can the Markov switching model forecast exchange rates?," Research Working Paper 91-04, Federal Reserve Bank of Kansas City.
- Francis X. Diebold & Javier Gardeazabal & Kamil Yilmaz, 1993.
"On cointegration and exchange rate dynamics,"
93-2, Federal Reserve Bank of Philadelphia.
- Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
- Davutyan, Nurhan & Pippenger, John, 1985. "Purchasing Power Parity Did Not Collapse during the 1970's," American Economic Review, American Economic Association, vol. 75(5), pages 1151-58, December.
- Cumby, Robert E. & Modest, David M., 1987. "Testing for market timing ability : A framework for forecast evaluation," Journal of Financial Economics, Elsevier, vol. 19(1), pages 169-189, September.
- Adler, Michael & Lehmann, Bruce, 1983. " Deviations from Purchasing Power Parity in the Long Run," Journal of Finance, American Finance Association, vol. 38(5), pages 1471-87, December.
- Jeffrey A. Frankel & Andrew K. Rose, 1994.
"A Survey of Empirical Research on Nominal Exchange Rates,"
NBER Working Papers
4865, National Bureau of Economic Research, Inc.
- Jeffrey A. Frankel and Andrew K. Rose., 1995. "A Survey of Empirical Research on Nominal Exchange Rates," Center for International and Development Economics Research (CIDER) Working Papers C95-051, University of California at Berkeley.
- Clements, Michael P. & Mizon, Grayham E., 1991. "Empirical analysis of macroeconomic time series : VAR and structural models," European Economic Review, Elsevier, vol. 35(4), pages 887-917, May.
When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:79:y:1997:i:4:p:655-664. 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: (Anna Pollock-Nelson)
If references are entirely missing, you can add them using this form.