Forecasting exchange rates out of sample: random walk vs Markov switching regimes

Dimitris Kirikos

Applied Economics Letters, 2000, vol. 7, issue 2, 133-136

Abstract: A random walk is compared with a Markov switching regimes process in forecasting exchange rates out of sample, using quarterly data on three currencies relative to the US dollar over the period 1973:3-1997:3. The results show that the relative performance of the models varies with the length of the post-sample period suggesting that the availability of more past information may be useful in forecasting future exchange rates.

Date: 2000
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DOI: 10.1080/135048500351979

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