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Empirical exchange rate models of the Seventies: do they fit out of sample? (1983)
| Venue: | JOURNAL OF INTERNATIONAL ECONOMICS |
| Citations: | 854 - 12 self |
BibTeX
@ARTICLE{Meese83empiricalexchange,
author = {Richard A. Meese and Kenneth Rogoff},
title = {Empirical exchange rate models of the Seventies: do they fit out of sample?},
journal = {JOURNAL OF INTERNATIONAL ECONOMICS},
year = {1983},
volume = {14},
pages = {3--24}
}
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Abstract
This study compares the out-of-sample forecasting accuracy of various structural and time series exchange rate models. We find that a random walk model performs as well as any estimated model at one to twelve month horizons for the dollar/pound, dollar/mark, dollar/yen and trade-weighted dollar exchange rates. The candidate structural models include the flexible-price (Frenkel-Bilson) and sticky-price (Dornbusch-Frankel) monetary models, and a sticky-price model which incorporates the current account (Hooper-Morton). The structural models perform poorly despite the fact that we base their forecasts on actual realized values of future explanatory variables.
Keyphrases
empirical exchange rate model dollar yen trade-weighted dollar exchange rate current account candidate structural model estimated model time series exchange rate model out-of-sample forecasting accuracy month horizon sticky-price model structural model future explanatory variable monetary model random walk model performs dollar mark dollar pound
