We develop regression-based tests of hypotheses about out of sample prediction errors. Representative tests include ones for zero mean and zero correlation between a prediction error and a vector of predictors. The relevant environments are ones in which predictions depend on estimated...

The relationship between interest rates and exchange rates is puzzling and poorly understood. But under some standard assumptions, interest rates can be adjusted to smooth real exchange rate movements at the possible price of increased volatility in other variables. In New Zealand, estimates...

This paper develops asymptotic econometric theory to help understand data generated by a present value model with a discount factor near one. A leading application is to exchange rate models. A key assumption of the asymptotic theory is that the discount factor approaches 1 as the sample size...

This paper considers regression-based tests for encompassing, when none of the models under consideration encompasses all the other models. For both in- and out-of-sample applications, I derive asymptotic distributions and propose feasible procedures to construct confidence intervals and test...

In many time series models, an infinite number of moments can be used for estimation in a large sample. I supply a technically undemanding proof of a condition for optimal instrumental variables use of such moments in a parametric model. I also illustrate application of the condition in...