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Measuring the economic significance of structural exchange rate models

Author

Listed:
  • Mario Cerrato
  • John Crosby
  • Muhammad Kaleem

Abstract

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.

Suggested Citation

  • Mario Cerrato & John Crosby & Muhammad Kaleem, 2011. "Measuring the economic significance of structural exchange rate models," Working Papers 2011_17, Business School - Economics, University of Glasgow.
  • Handle: RePEc:gla:glaewp:2011_17
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Exchange rate modelling: is the random walk beatable?
      by Economic Logician in Economic Logic on 2012-01-29 20:49:00

    More about this item

    Keywords

    monetary models; forecasting;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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