Altavilla, Carlo and de Grauwe, Paul (2010) Forecasting and combining competing models of exchange rate determination. Applied Economics, 42 (27). pp. 3455-3480. ISSN 0003-6846
Full text not available from this repository.Abstract
This article investigates the out-of-sample forecast performance of a set of competing models of exchange rate determination. We compare standard linear models with models that characterize the relationship between exchange rate and the underlying fundamentals by nonlinear dynamics. Linear models tend to outperform at short forecast horizons especially when deviations from long-term equilibrium are small. In contrast, nonlinear models with more elaborate mean-reverting components dominate at longer horizons especially when deviations from long-term equilibrium are large. The results also suggest that combining different forecasting procedures generally produces more accurate forecasts than can be attained from a single model.
| Item Type: | Article |
|---|---|
| Official URL: | http://dx.doi.org/10.1080/00036840802112505 |
| Additional Information: | © 2010 Taylor & Francis |
| Divisions: | European Institute |
| Subjects: | H Social Sciences > HG Finance J Political Science > JZ International relations |
| JEL classification: | F - International Economics > F3 - International Finance > F31 - Foreign Exchange F - International Economics > F3 - International Finance > F37 - International Finance Forecasting and Simulation |
| Date Deposited: | 05 Oct 2012 13:11 |
| Last Modified: | 05 Jan 2024 19:18 |
| URI: | http://eprints.lse.ac.uk/id/eprint/46593 |
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