Download or read book Modelling the US A Exchange Rate Using Cointegration Techniques written by Costas I. Karfakis and published by . This book was released on 1996 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Long Run Exchange Rate Modeling written by Mr.Ronald MacDonald and published by International Monetary Fund. This book was released on 1995 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we survey the recent literature on long run, or equilibrium, exchange rate modeling. In particular, we review the voluminous literature which tests for a unit root in real exchange rates and the closely related work on testing for a unit root in the residual from a regression of the nominal exchange rate on relative prices. We argue that the balance of evidence is supportive of the existence of some form of long-run exchange rate relationship. The form of this relationship, however, does not accord exactly with a traditional representation of the long-run exchange rate. We offer some potential explanations for this lack of conformity.
Download or read book Global Equilibrium Exchange Rates written by Mr.Angel J. Ubide and published by International Monetary Fund. This book was released on 1999-12-01 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a methodology for calculating bilateral equilibrium exchange rates for a panel of currencies in a way that guarantees global consistency. The methodology has three parts: a theoretical model that encompasses the balance of payments and the Balassa-Samuelson approaches to real exchange rate determination; an unobserved components decomposition in a cointegration framework that identifies a time-varying equilibrium real exchange rate; and an algebraic transformation that extracts bilateral equilibrium nominal rates. The results uncover that, by the start of Stage III of the European Economic and Monetary Union (EMU), the euro was significantly undervalued against the dollar and the pound, but overvalued against the yen. The paper also shows that the four major EMU currencies locked their parities with the euro at a rate close to equilibrium.
Download or read book The Monetary Model of Exchange Rates and Cointegration written by Javier Gardeazabal and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 206 pages. Available in PDF, EPUB and Kindle. Book excerpt: These notes draw from the Theory of Cointegration in order to test the monetary model of exchange rate determination. Previous evidence shows that the monetary model does not capture the short run dynamics of the exchange rate, specially when assessed in terms of forecasting accuracy. Even though the monetary equations of exchange rate determination may be bad indicators of how exchange rates are determined in the short run, they couldstill describe long run equilibrium relationships between the exchange rate and its fundamentals. Stationary deviations from those long run relationships are allowed in the short run. This book also addresses severalissues on Cointegration. Chapter 6 studies the small sample distribution of the likelihood ratio test statistics (on the dimension and restrictions on the cointegrating space) under deviations from normality. This monograph also focuses on the issue of optimal prediction in partially nonstationary multivariate time series models. In particular, it caries out an exchange rate prediction exercise.
Download or read book Real Exchange Rate Levels Productivity and Demand Shocks written by Menzie David Chinn and published by International Monetary Fund. This book was released on 1997-05-01 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the long-run relationship between the real exchange rate, traded and nontraded productivity levels, and government spending for 14 OECD countries, using recently developed panel cointegration tests. The results indicate that under certain assumptions it is easier to detect cointegration in panel data than in the available time series; moreover, the rate of reversion to long-run equilibrium is estimated with greater precision. Using the model augmented by oil prices, we find that in 1991 (the last year productivity data are available) there is less overvaluation of the U.S. dollar than that implied by a naive version of purchasing power parity.
Download or read book Cointegration Modeling of Expected Exchange Rates written by Robert A. Connolly and published by . This book was released on 2012 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: If foreign exchange market participants form rational forecasts of future exchange rates, we should expect that these forecasts should be closely matched to subsequent realizations. Specifically, rational forecasts of a time series and the observed series itself should be cointegrated. In this paper, we apply this insight to multiple exchange rate series and a corresponding set of market expectations of future values of the exchange rate series. We build a cointegration (and associated error-correction) model of actual and expected exchange rates for five exchange rates against the U.S. Dollar, using weekly expectations data from Money Market Services, International for the 1986 - 1997 period. Our empirical work produces very strong evidence of cointegration between the exchange rate series and the expected rates series. We find strong evidence that existing work that ignores the impact of error-correction is significantly misspecified. At the shortest forecast horizon, the error-correction term dominates all other determinants of changes in expected exchange rates in our sample and indicates a sensible response by market participants to past mistakes in forecasting future rates. At longer forecast horizons, error-correction remains very important, but lagged changes in actual and expected rates also play a role. We find limited evidence of threshold effects in our error-correction models.
Download or read book Integration Cointegration and the Forecast Consistency of Structural Exchange Rate Models written by Yin-Wong Cheung and published by . This book was released on 1997 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: Exchange rate forecasts are generated using some popular monetary models of exchange rates in conjunction with several estimation techniques. We propose an alternative set of criteria for evaluating forecast rationality which entails the following requirements: the forecast and the actual series i) have the same order of integration, ii) are cointegrated, and iii) have a cointegrating vector consistent with long run unitary elasticity of expectations. When these conditions hold, we consider the forecasts to be consistent.' We find that it is fairly easy for the generated forecasts to pass the first requirement. However, according to the Johansen procedure, cointegration fails to hold the farther out the forecasts extend. At the one year ahead horizon, most series and their respective forecasts do not appear cointegrated. Of the cointegrated pairs, the restriction of unitary elasticity of forecasts with respect to actual appears not to be rejected in general. The exception to this pattern is in the case of the error correction models in the longer subsample. Using the Horvath-Watson procedure, which imposes a unitary coefficient restriction, we find fewer instances of consistency, but a relatively higher proportion of the identified cases of consistency are found at the longer horizons.
Download or read book The Monetary Model of Exchange Rates and Cointegration written by J. Gardeazabal and published by . This book was released on 1992 with total page 212 pages. Available in PDF, EPUB and Kindle. Book excerpt: These notes draw from the Theory of Cointegration in order to test the monetary model of exchange rate determination. Previous evidence shows that the monetary model does not capture the short run dynamics of the exchange rate, specially when assessed in terms of forecasting accuracy. Even though the monetary equations of exchange rate determination may be bad indicators of how exchange rates are determined in the short run, they couldstill describe long run equilibrium relationships between the exchange rate and its fundamentals. Stationary deviations from those long run relationships are allowed in the short run. This book also addresses severalissues on Cointegration. Chapter 6 studies the small sample distribution of the likelihood ratio test statistics (on the dimension and restrictions on the cointegrating space) under deviations from normality. This monograph also focuses on the issue of optimal prediction in partially nonstationary multivariate time series models. In particular, it caries out an exchange rate prediction exercise.
Download or read book What Determines Real Exchange Rates The Long and Short of it written by Mr.Ronald MacDonald and published by International Monetary Fund. This book was released on 1997-02-01 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a reduced-form model of the real exchange rate. Using multilateral cointegration methods, the model is implemented for the real effective exchange rates of the dollar, the mark, and the yen, over the period 1974-1993. In contrast to much other research using real exchange rates, there is evidence of significant and sensible long-run relationships for a simplified version as well as for the full version of the model. The estimated long-run relationships are used to produce dynamic equations, which outperform a random walk and produce sensible dynamic patterns in the context of an impulse response analysis.
Download or read book Modelling the Australian US Dollar Exhange Rate During the Recent Float written by Colm Kearney and published by . This book was released on 1988 with total page 82 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Dornbusch Frankel Exchange Rate Model and Cointegration written by Jae-Kwang Hwang and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Dornbusch-Frankel monetary model is used to estimate the out-of-sample forecasting performance for the Japanese yen/U.S. dollar exchange rate. By using Johansen's multivariate cointegration, up to three cointegrating vectors were found between the exchange rate and macroeconomic fundamentals. This means that there is a long-run relationship between exchange rate and economic fundamentals. Based on error-correction models, the random-walk model outperforms the Dornbusch-Frankel model at every forecasting horizon. However, the Dornbusch Frankel model with the modified money demand function dominates the random-walk model at every forecasting horizon except twelve month. As a result, the stock price variable can improve the accuracy of forecasts of exchange rates at short-run horizons.
Download or read book Equilibrium Exchange Rates in the Transition written by Balázs Égert and published by . This book was released on 2007 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper sets out to estimate equilibrium real exchange rates for the Czech Republic, Hungary, Poland, Slovakia and Slovenia. A theoretical model is developed that provides an explanation for the appreciation of the real exchange rate based on tradable prices in the acceding countries. Our model can be considered as a competing but also completing framework to the traditional Balassa-Samuelson model. With this as a background, alternative cointegration methods are applied to time series (Engle-Granger, DOLS, ARDL and Johansen) and to three small-size panels (pooled and fixed effect OLS, DOLS, PMGE and MGE), which leaves us with around 5,000 estimated regressions. This enables us to examine the uncertainty surrounding estimates of equilibrium real exchange rates and the size of the underlying real misalignments.
Download or read book The Failure of the Monetary Exchange Rate Model for the Canadian U S Dollar written by David O. Cushman and published by . This book was released on 2000 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper the validity of the monetary exchange rate model in the long run for the Canadian-U.S. dollar exchange rate is examined. The primary test employed is the Johansen (1991) and Johansen and Juselius (1990) cointegration technique. The effects of dummy variables and lag specification on the statistical inference are considered, and Monte Carlo simulations based on the estimated parameters are employed. Despite the use of the longest data set yet for the Canadian case, no evidence is found in favour of the monetary exchange rate model using the Johansen procedures. This result is confirmed by several other cointegration procedures.
Download or read book Statistical Analysis of Foreign Exchange Rates written by Koji Kondo and published by . This book was released on 1997 with total page 356 pages. Available in PDF, EPUB and Kindle. Book excerpt: The main drawback however is that it is the more complicated to implement. A Markov chain technique is used as an estimation method. By imposing interest rate parity, the relationship between exchange rate and foreign and domestic interest rate difference is also simultaneously examined. The results indicate that interest rate difference does not affect the level and the volatility of exchange rates. This finding supports the random walk theory of exchange rates. On the other hand two different regimes, a high-volatility regime and a low-volatility regime, are discovered and well modeled. The development of a forecasting model will be the subject for future studies.
Download or read book Exchange Rate Modelling written by Ronald MacDonald and published by Springer Science & Business Media. This book was released on 2013-04-17 with total page 226 pages. Available in PDF, EPUB and Kindle. Book excerpt: Are foreign exchange markets efficient? Are fundamentals important for predicting exchange rate movements? What is the signal-to-ratio of high frequency exchange rate changes? Is it possible to define a measure of the equilibrium exchange rate that is useful from an assessment perspective? The book is a selective survey of current thinking on key topics in exchange rate economics, supplemented throughout by new empirical evidence. The focus is on the use of advanced econometric tools to find answers to these and other questions which are important to practitioners, policy-makers and academic economists. In addition, the book addresses more technical econometric considerations such as the importance of the choice between single-equation and system-wide approaches to modelling the exchange rate, and the reduced form versus structural equation problems. Readers will gain both a comprehensive overview of the way macroeconomists approach exchange rate modelling, and an understanding of how advanced techniques can help them explain and predict the behavior of this crucial economic variable.
Download or read book NBER Macroeconomics Annual 2007 written by Daron Acemoglu and published by . This book was released on 2008-03 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The NBER Macroeconomics Annual provides a forum for important debates in contemporary macroeconomics and major developments in the theory of macroeconomic analysis and policy that include leading economists from a variety of fields. The papers and accompanying discussions in NBER Macroeconomics Annual 2007 address exchange-rate models; implications of credit market frictions; cyclical budgetary policy and economic growth; the impacts of shocks to government spending on consumption, real wages, and employment; dynamic macroeconomic models; and the role of cyclical entry of new firms and products on the nature of business-cycle fluctuations and on the effects of monetary policy.
Download or read book The Monetary Model Strikes Back written by Valerie Cerra and published by International Monetary Fund. This book was released on 2008-03 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We revisit the dramatic failure of monetary models in explaining exchange rate movements. Using the information content from 98 countries, we find strong evidence for cointegration between nominal exchange rates and monetary fundamentals. We also find fundamentalsbased models very successful in beating a random walk in out-of-sample prediction.
