|
on International Finance |
| By: | Jian Wang; Jason J. Wu |
| Abstract: | This paper attacks the Meese-Rogoff (exchange rate disconnect) puzzle from a different perspective: out-of-sample interval forecasting. Most studies in the literature focus on point forecasts. In this paper, we apply Robust Semi-parametric (RS) interval forecasting to a group of Taylor rule models. Forecast intervals for twelve OECD exchange rates are generated and modified tests of Giacomini and White (2006) are conducted to compare the performance of Taylor rule models and the random walk. Our contribution is twofold. First, we find that in general, Taylor rule models generate tighter forecast intervals than the random walk, given that their intervals cover out-of-sample exchange rate realizations equally well. This result is more pronounced at longer horizons. Our results suggest a connection between exchange rates and economic fundamentals: economic variables contain information useful in forecasting the distributions of exchange rates. The benchmark Taylor rule model is also found to perform betterthan the monetary and PPP models. Second, the inference framework proposed in this paper for forecast-interval evaluation, can be applied in a broader context, such as inflation forecasting, not just to the models and interval forecasting methods used in this paper. |
| Keywords: | Foreign exchange ; Forecasting ; Taylor's rule ; Econometric models - Evaluation |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:22&r=ifn |
| By: | M., Azali; R.C., Royfaizal; C., Lee |
| Abstract: | Members of Asian countries have been thinking about using others’ currencies instead of U.S. Dollar for regional trade. Hence, there is a strong case to study the Japanese Yen as an alternative hard currency in this region for trade transaction. This paper investigates the long-run co-integration to determine the possibility and feasibility to use Yen as a future vehicle currency in the Asian region namely Malaysia, Singapore, Thailand, Indonesia, the Philippines, China, Korea and India by examining their daily exchange rate movements denominated in Yen. Empirical evidence shows that four out of eight countries namely Malaysia, the Philippines, Singapore and Korea are the countries that support our hypothesis. |
| Keywords: | Exchange Rate; Cointegration; Granger-causality; Asian |
| JEL: | F31 F33 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11891&r=ifn |
| By: | Caroline M. Betts; Timothy J. Kehoe |
| Abstract: | We study the quarterly bilateral real exchange rate and the relative price of non-traded to traded goods for 1225 country pairs over 1980?2005. We show that the two variables are positively correlated, but that movements in the relative price measure are smaller than those in the real exchange rate. The relation between the two variables is stronger when there is an intense trade relationship between two countries and when the variance of the real exchange rate between them is small. The relation does not change for rich/poor country bilateral pairs or for high inflation/low inflation country pairs. We identify an anomaly: The relation between the real exchange rate and relative price of non-traded goods for US/EU bilateral trade partners is unusually weak. |
| Keywords: | Trade |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmsr:415&r=ifn |
| By: | Baharom, A.H.; Royfaizal, R. C; Habibullah, M.S. |
| Abstract: | The furore and chaos created by the Asian financial crisis have ignited many studies on numerous subjects, and it is believed that the crisis has changed the way nations being administered and policies formed and implemented especially those regarding monetary and fiscal policies. Johansen (1991) cointegration method was used and the period was divided into two sub periods, albeit pre crisis and post crisis. The results obtained are similar with a number of past literatures pointing to no long run relationship between stock price and exchange rate for both periods. |
| Keywords: | Stock price; exchange rate; Asian financial crisis; Cointegration. |
| JEL: | G14 F31 |
| Date: | 2008–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11925&r=ifn |