Measuring the Economic Significance of Structural Exchange Rate Models

Mario Cerrato, John Crosby and Muhammad Kaleem

No 2011-62, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: This paper examines both the in-sample and out-of-sample performance of three monetary fundamental models of exchange rates and compares their out-of-sample performance to that of a simple Random Walk model. Using a data-set consisting of five currencies at monthly frequency over the period January 1980 to December 2009 and a battery of newly developed performance measures, the paper shows that monetary models do better (in-sample and out-of-sample forecasting) than a simple Random Walk model.

Keywords: monetary models; forecasting (search for similar items in EconPapers)
Date: 2011
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Working Paper: Measuring the economic significance of structural exchange rate models (2011)
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