Why is it so difficult to beat the random walk forecast of exchange rates?

• 成果类型: Article; Proceedings Paper
• 署名作者: Kilian, L; Taylor, MP
• 署名单位: University of Michigan System; University of Michigan; University of Warwick; Centre for Economic Policy Research - UK; European Central Bank
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/S0022-1996(02)00060-0
• 发表日期: 2003
• 页码: 85-107
• 关键词: purchasing power parity; Real exchange rate; random walk; economic models of exchange rate determination; long-horizon regression tests

摘要

Recent empirical evidence suggests that the time series behavior of the real exchange rate is well approximated by a nonlinear, exponential smooth transition autoregressive (ESTAR) model. This nonlinearity helps resolve a number of puzzles concerning the persistence and volatility of real exchange rates. In this paper, we explore whether it may also help resolve the well-known difficulties of exchange rate forecasting. We develop a bootstrap test of the random walk hypothesis of the nominal exchange rate, given ESTAR real exchange rate dynamics. We find strong evidence of predictability at horizons of 2 to 3 years, but not at shorter horizons. (C) 2002 Elsevier Science B.V. All rights reserved.