Stochastic Segmented Trends in the Exchange Rate: The Greek Drachma/U.S. Dollar Rate, 1981-1998

Dimitris Kirikos

European Research Studies Journal, 1998, vol. I, issue 3, 41-50

Abstract: It is shown that when the Central Bank manages the interest rate differential through standard interventions, aimed at offsetting exogenous disturbances in the foreign exchange market, and agents do not observe the current state of policy, then a Markov switching regimes representation is appropriate for exchange rate movements. Indeed, using monthly data on the GRD/$ exchange rate, over the period 1981-1998, we obtain evidence that a stochastic segmented trends model identifies the tuning points of the GRD/$ exchange rate series, beats naive out-of-sample forecasts, and gives good predictions which capture the devaluation of the Greek currency in March 1998.

Keywords: Policy Rules; Switching Regimes; Markov Process; Non-linear Forecasts (search for similar items in EconPapers)
Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (2)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:ers:journl:v:i:y:1998:i:3:p:41-50

Access Statistics for this article

More articles in European Research Studies Journal from European Research Studies Journal
Bibliographic data for series maintained by Marios Agiomavritis ().