Integration, cointegration and the forecast consistency of structural exchange rate models
Yin-Wong Cheung and
Menzie Chinn
International Finance from University Library of Munich, Germany
Abstract:
Exchange rate forecasts are generated using some popular monetary models of exchange rates, in conjunction with several estimation techniques. We propose an alternative set of criteria for evaluating forecast rationality, which entails the following requirements: the forecast and the actual series i) have the same order of integration, ii) are cointegrated, and iii) have a cointegrating vector consistent with long run unitary elasticity of expectations. When these conditions hold, we consider the forecasts to be "consistent". These criteria appear to be more appropriate for forecasts generated by structural models than typical measures of forecast rationality, since such models rely upon serially correlated measures of the fundamentals.
JEL-codes: F3 F4 (search for similar items in EconPapers)
Date: 1995-08-28
Note: EXFCASTS.WP International Finance
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)
Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/if/papers/9508/9508002.pdf (application/pdf)
https://econwpa.ub.uni-muenchen.de/econ-wp/if/papers/9508/9508002.ps.gz (application/postscript)
Related works:
Journal Article: Integration, cointegration and the forecast consistency of structural exchange rate models (1998) 
Working Paper: Integration, Cointegration and the Forecast Consistency of Structural Exchange Rate Models (1997) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpif:9508002
Access Statistics for this paper
More papers in International Finance from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).