EconPapers    
Economics at your fingertips  
 

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) Downloads
Working Paper: Integration, Cointegration and the Forecast Consistency of Structural Exchange Rate Models (1997) Downloads
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 ).

 
Page updated 2025-03-20
Handle: RePEc:wpa:wuwpif:9508002