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The empirical performance of macroeconomic exchange rate models is more than disappointing. This dismal result is also reflected in the forecasting capabilities of professional analysts: all in all, analysts are not in a position to beat naïve random walk forecasts. The root for this deficient...
Persistent link: https://www.econbiz.de/10005504428
The results of this paper complement the recent findings of real exchange rates as stationary processes. The standard procedure of applying a battery of unit root tests can be problematic since the tests are sensitive to the specifics of the time-series process. The novelty of the approach we...
Persistent link: https://www.econbiz.de/10005504540
reconciles the well-known difficulties in beating the random walk forecast model with the statistical evidence of nonlinear mean … reversion in deviations from fundamentals. Our analysis also provides a compelling rationale for the long-horizon predictability … chartist methods in favor of models based on economic fundamentals. …
Persistent link: https://www.econbiz.de/10005124271
Frictionless, perfectly competitive traded-goods markets justify thinking of purchasing power parity (PPP) as the main driver of exchange rates in the long-run. But differences in the traded/non-traded sectors of economies tend to be persistent and affect movements in local price levels in ways...
Persistent link: https://www.econbiz.de/10008550320
There has been serious suspicion of a spurious rejection of the unit roots in panel studies of PPP due to the failure to control for cross-sectional dependence. This article presents evidence of mean-reversion in industrial country real exchange rates in a set up that accounts naturally for...
Persistent link: https://www.econbiz.de/10005661753
squared forecast error for the spot rate (relative to a random walk forecast) by at least 33% at a six-month horizon and by …
Persistent link: https://www.econbiz.de/10005662140
The study analyses the characteristics of professional exchange rate forecasts for the €/US$ rate. The results indicate that the quality of forecasts produced by professional economists is rather poor and incompatible with the rational expectations hypothesis. This dismal result is according...
Persistent link: https://www.econbiz.de/10005666725
questionnaire evidence. We find that fund managers and FX dealers differ significantly. Fund managers rely more on fundamentals …
Persistent link: https://www.econbiz.de/10005791422
country pairs, we assess the ability of this model to forecast out-of-sample four major US dollar exchange rates using various …
Persistent link: https://www.econbiz.de/10008684687
during crises depends on the tail properties of the fundamentals’ distribution. We denote crisis linkages as either strong or … crisis levels, the probability that the other currency breaks down as well vanishes asymptotically if the fundamentals … fundamentals. …
Persistent link: https://www.econbiz.de/10005661842