Using a New Open Economy Macroeconomics model to make real nominal exchange rate forecasts

Peter Sellin ()
Additional contact information
Peter Sellin: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

No 213, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: In this paper we undertake an out-of-sample evaluation of the ability of a model to forecast the Swedish Krona’s real and nominal effective exchange rate, using a cointegrating relation between the real exchange rate, relative output, terms of trade and net foreign assets (or alternatively the trade balance). The cointegrating relation is derived from a theoretical model of the New Open Economy Macroeconomics type. The forecasting performance of our estimated vector error correction model is quite good once the dynamics of the model have been augmented with an interest rate differential.

Keywords: New Open Economy Macroeconomics; real exchange rate; nominal exchange rate; forecasting (search for similar items in EconPapers)
JEL-codes: C52 C53 F31 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2007-10-01
New Economics Papers: this item is included in nep-cba, nep-for, nep-ifn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.riksbank.se/upload/Dokument_riksbank/Ka ... apers/2007/wp213.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0213

Access Statistics for this paper

More papers in Working Paper Series from Sveriges Riksbank (Central Bank of Sweden) Sveriges Riksbank, SE-103 37 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Lena Löfgren ().