Can the Markov Switching Model Forecast Exchange Rates?

Charles Engel

No 4210, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A Markov-switching model is fit for eighteen exchange rates at quarterly and monthly frequencies. This model fits well in-sample at the quarterly frequency for many exchange rates. By the mean-squared-error or mean-absolute-error criterion. the Markov model does not generate superior forecasts at a random walk or at the forward rate. There appears to be some evidence that the forecast of the Markov model are superior at predicting the direction of change of the exchange rate.

Date: 1992-11
Note: IFM
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Citations: View citations in EconPapers (122)

Published as Journal of International Economics. vol. 36, pp. 151-165. 1994

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Related works:
Journal Article: Can the Markov switching model forecast exchange rates? (1994)
Working Paper: Can the Markov switching model forecast exchange rates? (1991)
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