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Forecasting EUR/PLN Exchange Rate: the Role of Purchasing Power Parity Hypothesis in ESTVEC Models

Adrian Marek Burda (), Błażej Mazur () and Mateusz Pipień ()
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Adrian Marek Burda: Cracow University of Economics

Dynamic Econometric Models, 2017, vol. 17, 97-114

Abstract: The purpose of this paper is to verify empirical consequences of imposing various forms of purchasing power parity (PPP) within a class of smooth transition vector error correction models (ESTVECM) for analysis of EUR/PLN exchange rage. Empirical importance of exponential smooth transition functions is confronted with the linear error-correction mechanism. A class of competing models for recursive samples are compared by the like-lihood ratio test, information criteria, and out of sample forecast accuracy measures.

Keywords: PPP; ESTVECM; cointegration; exchange rate forecasting (search for similar items in EconPapers)
JEL-codes: C32 F31 F37 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:cpn:umkdem:v:17:y:2017:p:97-114