Can Affine Term Structure Models Help Us Predict Exchange Rates?

The author proposes an arbitrage-free model of the joint behaviour of interest and exchange rates whose exchange rate forecasts outperform those produced by a random-walk model, a vector autoregression on the forward premiums and the rate of depreciation, and the standard forward premium regression. In addition, the model is able to reproduce the forward premium puzzle.

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Year of publication:	2006
Authors:	Rios, Antonio Diez de los
Institutions:	Bank of Canada
Subject:	Exchange rates \| Interest rates \| Econometric and statistical methods

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Series:	Working Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	50 pages
Classification:	E43 - Determination of Interest Rates; Term Structure Interest Rates ; F31 - Foreign Exchange ; G12 - Asset Pricing ; G15 - International Financial Markets
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005162430