Can Affine Term Structure Models Help Us Predict Exchange Rates?

Antonio Diez de los Rios

Staff Working Papers from Bank of Canada

Abstract: The author proposes an arbitrage-free model of the joint behaviour of interest and exchange rates whose exchange rate forecasts outperform those produced by a random-walk model, a vector autoregression on the forward premiums and the rate of depreciation, and the standard forward premium regression. In addition, the model is able to reproduce the forward premium puzzle.

Keywords: Exchange rates; Interest rates; Econometric and statistical methods (search for similar items in EconPapers)
JEL-codes: E43 F31 G12 G15 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2006
New Economics Papers: this item is included in nep-ets, nep-fin, nep-fmk, nep-for, nep-ifn, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Can Affine Term Structure Models Help Us Predict Exchange Rates? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:06-27

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