Panel analysis of the monetary approach to exchange rates: Evidence from ten new EU members and Turkey

Exchange rate determination: monetary approach in the new EU members and Turkey

“…Mark, 1995;MacDonald and Marsh, 1997). The robustness of these results have been called into question (Kilian, 1999;Berkowitz and Giorgianni, 2001) and recent studies have shown that it is possible, however difficult, to beat a random walk forecast (Mark and Sul, 2001;Faust et al, 2002;Rapach and Wohar, 2002;Uz and Ketenci, 2008). Recent studies by researchers such as Dibooglu and Kutan (2001), Su¨ppel (2003), Borghijs and Kuijs (2004) and Hsing (2006) on the newly entered EU members have analysed the response of exchange rates to fluctuations in output (or vice versa) including only a few of the new members.…”

Does the Euro affect the dynamic relation between stock market liquidity and the business cycle?

“…Indeed, the panel datasets increase substantially the degrees of freedom and thus increase the power of statistical tests (Rapach & Wohar (2004); Uz & Ketenci (2008)). In addition, according to Costantini & Martini (2010), combining the cross-section and time series data allows for heterogeneity between countries.…”

Taylor rules and exchange rate predictability in emerging economies

“…This hit rate is lower than the rate that we report for the same statistic, which is in the range of 80% and is shown in Panel B of Tables 4.a and 4.b. In contrast, Uz and Ketenci (2008) estimated the monetary model by using panel data for a set of ten Eastern European transition economies and Turkey. Using panel cointegration tests, these authors found strong evidence of a long-run relationship between the exchange rate and monetary fundamentals, but they found no evidence of out-of-sample predictability by using the asymptotic DM statistic.…”

“…Second, we investigate more realistic endogenous monetary models by models. Recent studies along this line include Engel et al (2008); West (2005, 2006); Mark (2009); and Molodtsova and Papell (2009) for industrialized countries, as well as Moura (2010); Moura et al (2008); and Uz and Ketenci (2008) for developing economies. The basic approach of the Taylor exchange rate model is to conciliate uncovered interest parity with endogenously determined interest rates, which approximates how interest rates are set in practice, by using a Taylor rule reaction function.…”