Colombian purchasing power parity analysed using a framework of multivariate cointegration

Rowland, Peter; Oliveros, Hugo

doi:10.32468/be.252

Cited by 4 publications

(4 citation statements)

References 26 publications

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“…In Colombia there are few studies that attempt to compare out of sample forecasting performance between the exchange rate models and the random walk specification. Rowland and Oliveros (2003a) Another study developed in Colombia was assessed by Rowland (2003b). He attempted to study three different conventional exchange rate models and a simple random walk form in line with Meese and Rogoff (1983).…”

Section: Review Of Empirical Studiesmentioning

confidence: 99%

Determinants of the exchange rate in Colombia under inflation targeting

Gamboa‐Estrada¹

2011

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This research studies the forecasting performance of conventional and more recent exchange rate models in Colombia. The purpose is to explain which have been the main exchange rate determinants under an Inflation Targeting regime and a completely floating exchange rate scheme. Compared to similar studies, this paper includes conventional specifications and Taylor rule approaches that assume exogenous and endogenous monetary policy respectively. Based on the Johansen multivariate cointegration methodology, the results provide evidence for the existence of cointegration in all specifications except in the Sticky-Price Monetary Model and the Taylor Rule model that includes the real exchange rate. In addition, out of sample forecasting performance is analyzed in order to compare if all specifications outperform the drift less random walk model. All models outperform the random walk at one month horizon. However, the Flexible Price Monetary Model and the Uncovered Interest Parity Condition have superior predictive power for longer horizons.

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Section: Review Of Empirical Studiesmentioning

confidence: 99%

Determinants of the exchange rate in Colombia under inflation targeting

Gamboa‐Estrada¹

2011

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“…A study of the Colombia nominal effective exchange rate by Rowland and Oliveros (2003) uses a PPP based model in combination with a framework of multivariate cointegration. Also in this case the forecasts of a random walk are outperformed.…”

Section: Brief Review Of the Literaturementioning

confidence: 99%

“…1 Meese and Rogoff (1983a). 2 See, for example, Kim and Mo (1995), MacDonald and Taylor (1984), Rowland and Oliveros (2003), and Tawadaros (2001). 3 According to the notation used by foreign exchange markets, USD/COP stands for the rate of exchange between the United States and Colombia expressed as Colombian pesos per U.S. dollar.…”

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confidence: 99%

“…1. Statistics for the forecast errors of the models All values are in approximate percentage terms (the difference between two logarithmic values is approximately the same as the relative difference between the variables).Another interesting fact is that the model based on multivariate cointegration performs so badly Rowland and Oliveros (2003). used a similar model to forecast the nominal effective exchange rate with relatively good results.…”

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Forecasting the USD/COP exchange rate: a random walk with a variable drift

Rowland¹

2003

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This study develops three exchange rate models as well as a simple statistical model defined as a random walk with a variable drift. The exchange rate models all use the purchasing power parity hypothesis to account for the long-term relationships between prices and the exchange rate, together with error correction models to represent any shortterm dynamics. The models are estimated for the USD/COP rate of exchange, and their forecast performance is compared to that of a simple random walk as well as to that of the random walk with a variable drift term. Two of the models are shown to outperform the simple random walk on the 12 and 24-months forecasting horizon. However, all the models are outperformed by the random walk with a variable drift, where the drift term is estimated using a Kalman filter. The results suggest that fundamental models might only be a useful tool for forecasting of the exchange rate in the very long run.

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Analisis Purchasing Power Parity Indonesia Menggunakan Pendekatan Error Correction Model

Hafidh¹

2012

JEP

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Colombian purchasing power parity analysed using a framework of multivariate cointegration

Cited by 4 publications

References 26 publications

Determinants of the exchange rate in Colombia under inflation targeting

Determinants of the exchange rate in Colombia under inflation targeting

Forecasting the USD/COP exchange rate: a random walk with a variable drift

Analisis Purchasing Power Parity Indonesia Menggunakan Pendekatan Error Correction Model

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