Exchange rate predictability in a changing world
By Joseph P. Byrne, Dimitris Korobilis, Pinho J. Ribeiro. 2014
78 citations recorded by the source corpus.
An expanding literature articulates the view that Taylor rules are helpful in predicting exchange rates. In a changing world, however, Taylor rule parameters may be subject to structural instabilities, for example in the aftermath of the Global Financial Crisis. This paper forecasts exchange rates using Taylor rules with Time-Varying Parameters (TVP) estimated by Bayesian methods. Focusing on the data from the crisis, we improve upon the random walk for at least half, and for as many as seven out of 10, of the currencies considered. Results are stronger when we allow the TVP of the Taylor rules to differ between countries.
View Paper: https://www.semanticscholar.org/paper/f26503c8cf5c22322bb7ea1b60037d9d1492f554
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Citations in the corpus
- On the sources of uncertainty in exchange rate predictability (2018, unknown): “∆et+h = Xtθt + vt+h, vt+h ∼ N(0, Vt), (observation equation); (1) (5)See, for example, Byrne et al. (2016), Cheung et al. (2005), Engel et al.”
- Forecasting: theory and practice (2020, background): “3; Lopez-Suarez and Rodriguez-Lopez, 2011). Third, few economists argue that the role of macroeconomic fundamentals may be varying over time and this should be accounted for in a forecasting setting (Byrne et al., 2016; Beckmann and Schussler, 2016). The dominant part of the exchange rate forecastin”