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Private Information and a Macro Model of Exchange Rates: Evidence from a Novel Data Set / Menzie D. Chinn, Michael J. Moore.
- Format:
- Book
- Author/Creator:
- Chinn, Menzie D.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w14175.
- NBER working paper series no. w14175
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Private Information and a Macro Model of Exchange Rates
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2008.
- Summary:
- We propose an exchange rate model which is a hybrid of the conventional specification with monetary fundamentals and the Evans-Lyons microstructure approach. It argues that the failure of the monetary model is principally due to private preference shocks which render the demand for money unstable. These shocks to liquidity preference are revealed through order flow. We estimate a model augmented with order flow variables, using a unique data set: almost 100 monthly observations on inter-dealer order flow on dollar/euro and dollar/yen. The augmented macroeconomic, or "hybrid", model exhibits out of sample forecasting improvement over the basic macroeconomic and random walk specifications.
- Notes:
- Print version record
- July 2008.
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