Description |
1 online resource (31 pages) |
Series |
IMF working paper, 2227-8885 ; WP/03/21 |
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IMF working paper ; WP/03/21.
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Summary |
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 |
Bibliography |
Includes bibliographical references (pages 28-31) |
Notes |
Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212 MiAaHDL |
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English |
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digitized 2010 HathiTrust Digital Library committed to preserve pda MiAaHDL |
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Print version record |
Subject |
Foreign exchange rates -- Forecasting
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Purchasing power parity.
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Foreign exchange rates -- Forecasting
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Purchasing power parity
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Form |
Electronic book
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Author |
International Monetary Fund. Western Hemisphere Department.
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ISBN |
1451891768 |
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9781451891768 |
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1281604739 |
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9781281604736 |
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1462335950 |
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9781462335954 |
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1452746265 |
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9781452746265 |
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9786613785428 |
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6613785423 |
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9781451843934 |
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1451843933 |
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