1998
DOI: 10.1080/000368498325822
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Forecasting foreign exchange rates with an intrinsically nonlinear dynamic speed of adjustment model

Abstract: Forecasting foreign exchange rates is an important but difficult process; therefore, it is important to use a superior forecasting model. The paper takes up this criterion and proposes to describe and forecast foreign exchange rates by developing an intrinsically nonlinear model with variable and dynamic speeds of adjustment. It is found that the speed of adjusting the random (or expected) to the equilibrium rate is very slow, implying that fiscal policy (statistically insignificat) and monetary policy (statis… Show more

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Cited by 16 publications
(31 citation statements)
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“…Detailed explanations of equations (1)-(5) can be found in Lin and Chen (1998). Briefly, equation (1) means that the actual change of the spot rate at time t + m, S j (t + m) -S j (t + m -1), is adjusted dynamically, at a dynamic and variable speed, d j (t + m), to the deviation of the desired spot rate at time t + m from the actual spot rate at time t + m -1, S j *(t + m) -S j (t + m -1), plus the random error at time t + m, W j (t + m).…”
Section: S T M S T M T M S T M S T M W T M T M J Nmentioning
confidence: 99%
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“…Detailed explanations of equations (1)-(5) can be found in Lin and Chen (1998). Briefly, equation (1) means that the actual change of the spot rate at time t + m, S j (t + m) -S j (t + m -1), is adjusted dynamically, at a dynamic and variable speed, d j (t + m), to the deviation of the desired spot rate at time t + m from the actual spot rate at time t + m -1, S j *(t + m) -S j (t + m -1), plus the random error at time t + m, W j (t + m).…”
Section: S T M S T M T M S T M S T M W T M T M J Nmentioning
confidence: 99%
“…The error components-seemingly unrelated nonlinear regression (EC-SUNR) model, in which the speed of adjustment is assumed to change variably and dynamically through time, consists of seven equations of which the first five are given by Lin and Chen (1998): …”
Section: The Error Components-seemingly Unrelated Nonlinear Regressiomentioning
confidence: 99%
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