Out-of-sample exchange rate predictability with Taylor rule fundamentals

• 成果类型: Article
• 署名作者: Molodtsova, Tanya; Papell, David H.
• 署名单位: University of Houston System; University of Houston; Emory University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2008.11.001
• 发表日期: 2009
• 页码: 167-180
• 关键词: Out-of-sample predictability; Exchange rates; Taylor rules

摘要

An extensive literature that studied the performance of empirical exchange rate models following Meese and Rogoffs [Meese, R.A., Rogoff, K., 1983a, Empirical Exchange Rate Models of the Seventies: Do They Fit Out of Sample? journal of International Economics 14,3-24.] seminal paper has not convincingly found evidence of out-of-sample exchange rate predictability This paper extends the conventional set of models of exchange rate determination by investigating predictability of models that incorporate Taylor rule fundamentals. We find evidence of short-term predictability for 11 out of 12 currencies vis-A-vis the U.S. dollar over the post-Bretton Woods float, with the strongest evidence coming from specifications that incorporate heterogeneous coefficients and interest rate smoothing. The evidence of predictability is much stronger with Taylor rule models than with conventional interest rate, purchasing power parity, or monetary models. (C) 2008 Elsevier B.V. All rights reserved.