Evaluating the Predictability of Exchange Rates Using Long-Horizon Regressions: Mind Your p's and q's!

Michael McCracken and Stephen G Sapp

Journal of Money, Credit and Banking, 2005, vol. 37, issue 3, 473-94

Abstract: Since the breakdown of the Bretton Woods agreement, researchers have used a wide variety of structural models to try to predict exchange rate movements. Unfortunately, finding consistent evidence that these models outperform a random walk has proven elusive. In this paper, we investigate the impact different methods of inference may have had on these conclusions. Using p-values based on recently developed tests of forecast accuracy and encompassing, as well as q-values designed to mitigate multiple testing problems, we provide stronger evidence consistent with these models having superior predictive ability. Our results suggest that previous studies' inability to detect predictive ability may have been influenced by the statistics used and the manner in which they were employed.

Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (25)

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:mcb:jmoncb:v:37:y:2005:i:3:p:473-94

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().