Medium-Term Exchange Rate Forecasting : What Can We Expect? /
The medium-term predictability of exchange rate movements is examined using three models of fundamentals: purchasing power parity, the monetary model, and uncovered interest parity. While the first two approaches yield favorable in-sample results, these largely reflect finite-sample estimation biase...
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| Natura: | Periodico |
| Lingua: | English |
| Pubblicazione: |
Washington, D.C. :
International Monetary Fund,
2003.
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| Serie: | IMF Working Papers; Working Paper ;
No. 2003/021 |
| Accesso online: | Full text available on IMF |
| Riassunto: | The medium-term predictability of exchange rate movements is examined using three models of fundamentals: purchasing power parity, the monetary model, and uncovered interest parity. While the first two approaches yield favorable in-sample results, these largely reflect finite-sample estimation biases. Adjusting for these biases, there is little evidence of predictability, consistent with the lack of systematic improvement in out-of-sample forecasting performance relative to a random walk. Uncovered interest parity fares better at long horizons, but reflects information already embodied in market prices; in this sense, it may not be useful as an indicator of exchange rate misalignment. While more elaborate models of fundamentals might have better medium-term forecasting properties, careful attention must be paid to finite-sample biases in assessing predictability. |
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| Descrizione del documento: | <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required |
| Descrizione fisica: | 1 online resource (31 pages) |
| Natura: | Mode of access: Internet |
| ISSN: | 1018-5941 |
| Accesso: | Electronic access restricted to authorized BRAC University faculty, staff and students |