Exchange rate forecasting with real-time data: Evidence from Western offshoots

Chang, Ming‐Jen; Matsuki, Takashi

doi:10.1016/j.ribaf.2021.101538

Cited by 4 publications

(1 citation statement)

References 34 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Molodtsova and Papell (2009) find that a model including Taylor rule fundamentals succeed at one-month predictions under the CW criterion; Lace, Mačerinskienė, and Balčiūnas (2015) argue that EUR/USD exchange rate can be determined by government yields in the short-run. More recently, Chang and Matsuki (2022) also finds that Taylor rule fundamentals help improve exchange rate forecasting under the RMSE and CW criteria.…”

Section: Literature Reviewmentioning

confidence: 99%

Do Divisia monetary aggregates help forecast exchange rates in a negative interest rate environment?

Molinas

Binner

Tong

2022

The European Journal of Finance

View full text Add to dashboard Cite

This paper contributes to the literature as the first work of its kind to examine the role and importance of Divisia monetary aggregates and concomitant User Cost Price indices as superior monetary policy forecasting tools in a negative interest rate environment. We compare the performance of Divisia monetary aggregates with traditional simple-sum aggregates in several theoretical models and in a Bayesian VAR to forecast the exchange rates between the euro, the dollar and yuan at various horizons using quarterly data. We evaluate their performance against that of a random walk using two criteria: Root Mean Square Error ratios and the Clark-West statistic. We find that, under a free-floating exchange regime, superior Divisia monetary aggregates outperform their simple sum counterparts and the benchmark random walk in a negative interest rate environment, consistently.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Do Divisia monetary aggregates help forecast exchange rates in a negative interest rate environment?

Molinas

Binner

Tong

2022

The European Journal of Finance

View full text Add to dashboard Cite

show abstract

Modelling and Forecasting of Exchange Rate Pairs Using the Kalman Filter

Date,

Maunthrooa

2024

Journal of Forecasting

View full text Add to dashboard Cite

Developing and employing practically useful and easy to calibrate models for prediction of exchange rates remains a challenging task, especially for highly volatile emerging market currencies. In this paper, we propose a novel approach for joint prediction of correlated exchange rates for two different currencies with respect to the same base currency. For this purpose, we reformulate a generalized version of a bivariate ARMA model into a state space model and use the Kalman filter for estimation and forecasting of the underlying exchange rates as latent variables. With extensive numerical experiments spanning 18 different exchange rates (across both emerging markets, developing and developed economies), we demonstrate that our approach consistently outperforms univariate ARMA models as well as the random walk model in short term out‐of‐sample prediction for various exchange rate pairs. Our study fills a gap in the empirical finance literature in terms of robust, explainable, accurate, and easy to calibrate models for forecasting correlated exchange rates. The proposed methodology has applications in exchange rate risk management as well as pricing of financial derivatives based on two exchange rates.

show abstract

Dancing with dragon: The RMB and developing economies’ currencies

Liu

2023

Research in International Business and Finance

View full text Add to dashboard Cite

Exchange rate forecasting with real-time data: Evidence from Western offshoots

Cited by 4 publications

References 34 publications

Do Divisia monetary aggregates help forecast exchange rates in a negative interest rate environment?

Do Divisia monetary aggregates help forecast exchange rates in a negative interest rate environment?

Modelling and Forecasting of Exchange Rate Pairs Using the Kalman Filter

Dancing with dragon: The RMB and developing economies’ currencies

Contact Info

Product

Resources

About