Can we beat the random walk in forecasting CEE exchange rates?
It is commonly known that various econometric techniques fail to consistently outperform a simple random walk model in forecasting exchange rates. The aim of this study is to analyse whether this also holds for selected currencies of the CEE region as the literature relating to the ability of forecasting these exchange rates is scarce. We tackle this issue by comparing the random walk based out-of-sample forecast errors of the Polish zloty, the Czech koruna and the Hungarian forint exchange rates against the euro with the corresponding errors generated by various single- and multi-equation models of these exchange rates. The results confirm that it is very difficult to outperform a simple random walk model in our CEE currencies forecasting contest.
|Date of creation:||2012|
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- Daniel F. Waggoner & Tao Zha, 1999.
"Conditional Forecasts In Dynamic Multivariate Models,"
The Review of Economics and Statistics,
MIT Press, vol. 81(4), pages 639-651, November.
- Daniel F. Waggoner & Tao Zha, 1998. "Conditional forecasts in dynamic multivariate models," FRB Atlanta Working Paper 98-22, Federal Reserve Bank of Atlanta.
- Michal Rubaszek & Pawel Skrzypczynski & Grzegorz Koloch, 2011.
"Forecasting the Polish zloty with non-linear models,"
National Bank of Poland Working Papers
81, National Bank of Poland, Economic Institute.
- Michał Rubaszek & Paweł Skrzypczyński & Grzegorz Koloch, 2010. "Forecasting the Polish Zloty with Non-Linear Models," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 2(2), pages 151-167, March.
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