Real Exchange Rates and Switching Regimes

Arbeitspapier

We suggest that the real exchange rate between the major currencies in the post-Bretton Woods period can be described by a stationary, two state Markov switching AR(1) model. Based on the forecast performance, both in-sample and out-of-sample, we find that this model out-performs two competing models where the real exchange rate is non-stationary. We also find that the existence of different regimes, as in the Markov switching model, is consistent with the common finding of unit roots in the real exchange rate.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 1999:4

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Forecasting Models; Simulation Methods ; Foreign Exchange
• Subject: Real exchange rates ; Markov switching autoregressive models ; forecasts ; simulation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bergman, U. Michael ; Hansson, Jesper
• Event: Veröffentlichung
• (who): Lund University, School of Economics and Management, Department of Economics
• (where): Lund
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/259828
• Last update: 10.03.2025, 11:42 AM CET