Arbeitspapier
The importance of interest rates for forecasting the exchange rate
This study compares the forecasting performance of a structural exchange rate model that combines the purchasing power parity condition with the interest rate differential in the long run, with some alternative models. The analysis is applied to the Norwegian exchange rate. The long run equilibrium relationship is embedded in a parsimonious representation for the exchange rate. The structural exchange rate representation is stable over the sample and outperforms a random walk in an out-of-sample forecasting exercise at one to four horizons. Ignoring the interest rate differential in the long run, however, the structural model no longer outperforms a random walk.
- Language
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Englisch
- Bibliographic citation
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Series: Discussion Papers ; No. 340
- Classification
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Wirtschaft
Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Forecasting Models; Simulation Methods
Foreign Exchange
- Subject
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Equilibrium real exchange rate
cointegration VAR
out-of-sample forecasting
- Event
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Geistige Schöpfung
- (who)
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Bjørnland, Hilde C.
Hungnes, Håvard
- Event
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Veröffentlichung
- (who)
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Statistics Norway, Research Department
- (where)
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Oslo
- (when)
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2003
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Bjørnland, Hilde C.
- Hungnes, Håvard
- Statistics Norway, Research Department
Time of origin
- 2003
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