Out Of Sample Exchange Rate Predictability With Real Time Data
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Out Of Sample Exchange Rate Predictability With Real Time Data
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Author : Onur Ince
language : en
Publisher:
Release Date : 2019
Out Of Sample Exchange Rate Predictability With Real Time Data written by Onur Ince and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
This paper evaluates short-run out-of-sample exchange rate predictability with real-time data for 15 OECD countries from 1973 to 2013. We consider the Taylor rule fundamentals model, where the variables that enter the Taylor rule are used to forecast exchange rate changes, and the Taylor rule differentials model, where a Taylor rule with postulated coefficients is used in the forecasting regression. We find evidence of predictability with the Taylor rule fundamentals model for 9 out of 15 countries. The Taylor rule differentials model performs worse, and the evidence of predictability is the weakest with the conventional monetary and PPP models.
Out Of Sample Exchange Rate Predictability With Taylor Rule Fundamentals And Real Time Data
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Author : Tetyana Molodtsova
language : en
Publisher:
Release Date : 2008
Out Of Sample Exchange Rate Predictability With Taylor Rule Fundamentals And Real Time Data written by Tetyana Molodtsova and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Foreign exchange rates categories.
Exchange Rate Forecasting
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Author : Jon Faust
language : en
Publisher:
Release Date : 2003
Exchange Rate Forecasting written by Jon Faust and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.
We examine the forecasting performance of standard macro models of exchange rates in real time, using dozens of different vintages of the OECDs Main Economic Indicators database. We calculate out-of-sample forecasts as they would have been made at the time, and compare them to a random walk alternative. The resulting "time series" of forecast performance indicates that both data revisions and changes in the sample period typically have large effects on exchange rate predictability. We show that the favorable evidence of long-horizon exchange rate predictability for the DM and Yen in Mark (1995) is present in only a narrow two-year window of data vintages around that used by Mark. In addition, approximately one-third of the improved forecasting performance of Mark's monetary model over a random walk is eventually undone by data revisions. Related to this, we find the models consistently perform better using original release data than using fully revised data. Finally, we find that model-based exchange rate forecasts are sometimes better when using Federal Reserve Staff forecasts of future fundamentals instead of actual future values of fundamentals. This contradicts a cherished presumption in the literature that dates all the way back to Meese and Rogoff (1983).
Medium Term Exchange Rate Forecasting
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Author : Mr.Guy Meredith
language : en
Publisher: International Monetary Fund
Release Date : 2003-01-01
Medium Term Exchange Rate Forecasting written by Mr.Guy Meredith and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-01-01 with Business & Economics categories.
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.
Real Time Out Of Sample Exchange Rate Predictability
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Author : Onur Ince
language : en
Publisher:
Release Date : 2013
Real Time Out Of Sample Exchange Rate Predictability written by Onur Ince and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Foreign Exchange Rates
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Author : Arif Orçun Söylemez
language : en
Publisher: Routledge
Release Date : 2021-02-07
Foreign Exchange Rates written by Arif Orçun Söylemez and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-02-07 with Business & Economics categories.
Predicting foreign exchange rates has presented a long-standing challenge for economists. However, the recent advances in computational techniques, statistical methods, newer datasets on emerging market currencies, etc., offer some hope. While we are still unable to beat a driftless random walk model, there has been serious progress in the field. This book provides an in-depth assessment of the use of novel statistical approaches and machine learning tools in predicting foreign exchange rate movement. First, it offers a historical account of how exchange rate regimes have evolved over time, which is critical to understanding turning points in a historical time series. It then presents an overview of the previous attempts at modeling exchange rates, and how different methods fared during this process. At the core sections of the book, the author examines the time series characteristics of exchange rates and how contemporary statistics and machine learning can be useful in improving predictive power, compared to previous methods used. Exchange rate determination is an active research area, and this book will appeal to graduate-level students of international economics, international finance, open economy macroeconomics, and management. The book is written in a clear, engaging, and straightforward way, and will greatly improve access to this much-needed knowledge in the field.
Revisiting The Out Of Sample Exchange Rate Predictability In The Monetary Model
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Author : Hsiu-Hsin Ko
language : en
Publisher:
Release Date : 2016
Revisiting The Out Of Sample Exchange Rate Predictability In The Monetary Model written by Hsiu-Hsin Ko and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
We utilize Monte Carlo simulations to evaluate, in finite samples, the forecasting performance of the monetary model. The data generating process (DGP) is based on the assumptions of Engel and West (2005) about the present-value model for exchange rates, namely that the discount factor is close to unity and the fundamentals have unit-root processes. We evaluate the out-of-sample performance of the monetary model against the random walk model by using the long-run regression test. While the forecasting power of the long-run regression is not strong, the experimental evidence illustrates that the probability of out-of-sample exchange rate predictability at long horizons is generally larger than that at the short horizons. We conclude that the present-value model under Engel and West's (2005) explanation has a heretofore unrecognized implication of out-of-sample exchange rate predictability at long run horizons.
Out Of Sample Exchange Rate Predictability In Emerging Markets
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Author : Ibrahim Jamali
language : en
Publisher:
Release Date : 2019
Out Of Sample Exchange Rate Predictability In Emerging Markets written by Ibrahim Jamali and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
We provide an in-depth analysis of the predictive ability of models with fundamentals and technical indicators for fourteen emerging market currencies. Our findings suggest that the forecasts from the symmetric Taylor rule as well as from a predictive regression exploiting the informational content of the momentum indicator are statistically superior to those of the random walk and other competing models. We combine the forecasts from the two best performing models via simple techniques and assess the economic significance of the out-of-sample forecasts using a trading strategy based on the sign of the predicted currency returns. Our economic significance results demonstrate that the symmetric Taylor rule, momentum and combination forecasts generate the largest net-of-transactions costs and risk-adjusted returns.
Taylor Rule Deviations And Out Of Sample Exchange Rate Predictability
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Author : Onur Ince
language : en
Publisher:
Release Date : 2019
Taylor Rule Deviations And Out Of Sample Exchange Rate Predictability written by Onur Ince and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
The Taylor rule has become the dominant model for academic evaluation of out-of-sample exchange rate predictability. Two versions of the Taylor rule model are the Taylor rule fundamentals model, where the variables that enter the Taylor rule are used to forecast exchange rate changes, and the Taylor rule differentials model, where a Taylor rule with postulated coefficients is used in the forecasting regression. We use data from 1973 to 2014 to evaluate short-run out-of-sample predictability for eight exchange rates vis-à-vis the U.S. dollar, and find strong evidence in favor of the Taylor rule fundamentals model alternative against the random walk null. The evidence of predictability is weaker with the Taylor rule differentials model, and still weaker with the traditional interest rate differential, purchasing power parity, and monetary models. The evidence of predictability for the fundamentals model is not related to deviations from the original Taylor rule for the U.S., but is related to deviations from a modified Taylor rule for the U.S. with a higher coefficient on the output gap. The evidence of predictability is also unrelated to deviations from Taylor rules for the foreign countries and adherence to the Taylor principle for the U.S.
Taylor Rule Exchange Rate Forecasting During The Financial Crisis
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Author : Tanya Molodtsova
language : en
Publisher:
Release Date : 2012
Taylor Rule Exchange Rate Forecasting During The Financial Crisis written by Tanya Molodtsova and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with Economics categories.
This paper evaluates out-of-sample exchange rate predictability of Taylor rule models, where the central bank sets the interest rate in response to inflation and either the output or the unemployment gap, for the euro/dollar exchange rate with real-time data before, during, and after the financial crisis of 2008-2009. While all Taylor rule specifications outperform the random walk with forecasts ending between 2007:Q1 and 2008:Q2, only the specification with both estimated coefficients and the unemployment gap consistently outperforms the random walk from 2007:Q1 through 2012:Q1. Several Taylor rule models that are augmented with credit spreads or financial condition indexes outperform the original Taylor rule models. The performance of the Taylor rule models is superior to the interest rate differentials, monetary, and purchasing power parity models.