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Measuring the economic significance of structural exchange rate models

Listed author(s):
  • Mario Cerrato
  • John Crosby
  • Muhammad Kaleem

This paper examines both the in-sample and out-of-sample performance of three monetary fundamental models of exchange rates and compares their out-of-sample performance to that of a simple Random Walk model. Using a data-set consisting of five currencies at monthly frequency over the period January 1980 to December 2009 and a battery of newly developed performance measures, the paper shows that monetary models do better (in-sample and out-of- sample forecasting) than a simple Random Walk model.

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File URL: http://www.gla.ac.uk/media/media_200683_en.pdf
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Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2011_17.

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Date of creation: Jun 2011
Handle: RePEc:gla:glaewp:2011_17
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  21. Clarida, Richard & Sarno, Lucio & Taylor, Mark P & Valente, Giorgio, 2005. "The Role of Asymmetries and Regime Shifts in the Term Structure of Interest Rates," CEPR Discussion Papers 4835, C.E.P.R. Discussion Papers.
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