Conventional and Unconventional Approaches to Exchange Rate Modeling and Assessment / Menzie D. Chinn, Ron Alquist.

Format:

Book

Author/Creator:

Chinn, Menzie D.

Contributor:

National Bureau of Economic Research.

Alquist, Ron.

Series:

Working Paper Series (National Bureau of Economic Research) no. w12481.

NBER working paper series no. w12481

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2006.

Summary:

We examine the relative predictive power of the sticky price monetary model, uncovered interest parity, and a transformation of net exports and net foreign assets. In addition to bringing Gourinchas and Rey's new approach and more recent data to bear, we implement the Clark and West (forthcoming) procedure for testing the significance of out-of-sample forecasts. The interest rate parity relation holds better at long horizons and the net exports variable does well in predicting exchange rates at short horizons in-sample. In out-of-sample forecasts, we find evidence that our proxy for Gourinchas and Rey's measure of external imbalances outperforms a random walk at short horizons as do some of other models, although no single model uniformly outperforms the random walk forecast.

Notes:

Print version record

August 2006.