The out-of-sample success of term structure models as exchange rate predictors: a step beyond

• 成果类型: Article; Proceedings Paper
• 署名作者: Clarida, RH; Sarno, L; Taylor, MP; Valente, G
• 署名单位: University of Warwick; Columbia University; National Bureau of Economic Research; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(02)00059-4
• 发表日期: 2003
• 页码: 61-83
• 关键词: foreign exchange; term structure; forecasting; nonlinearity; Markov switching

摘要

A large literature suggests that standard exchange rate models cannot outperform a random walk forecast and that the forward rate is not an optimal predictor of the spot rate. However, there is evidence that the term structure of forward premia contains valuable information for forecasting future spot exchange rates and that exchange rate dynamics display nonlinearities. This paper proposes a term-structure forecasting model of exchange rates based on a regime-switching vector equilibrium correction model which is novel in this context. Our model significantly outperforms both a random walk and, to a lesser extent, a linear term-structure vector equilibrium correction model for four major dollar rates across a range of horizons. (C) 2002 Elsevier Science B.V. All rights reserved.