US dollar/Euro exchange rate: a monthly econometric model for forecasting

Domenico Sartore, Lucia Trevisan, Michele Trova and Francesca Volo ()

The European Journal of Finance, 2002, vol. 8, issue 4, 480-501

Abstract: The intent of this paper is the construction of an econometric model able to produce reliable and reasonable forecasts for the US dollar/Euro real exchange rate. In order to achieve this aim, an area-wide model is analysed. The aggregation is motivated by the fact that the Euro-zone is under a single monetary policy. Furthermore, a more parsimonious parametric model enables one to consider an important source of non-stationarity given by the presence of structural breaks using the multivariate cointegration analysis. Against the Meese-Rogoff critique, the out-of-sample one-step-ahead forecasts using actual values of the exogenous produced by the estimated VECM are reasonably satisfactory.

Keywords: Real Exchange Rates; Cointegration; Structural Breaks; Area-WIDE Model; Forecasting (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1080/13518470210160894

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