Currency Forecasting with Markov Switching Models: Exploring the Joint Behavior of the Term Structure of Forward Exchange Rate Premia and the Term Structure of Interest Rates - Couverture souple

Mouoyebe, Charles

 
9783639152869: Currency Forecasting with Markov Switching Models: Exploring the Joint Behavior of the Term Structure of Forward Exchange Rate Premia and the Term Structure of Interest Rates
Couverture souple
ISBN 10 : 3639152867 ISBN 13 : 9783639152869
Editeur : VDM Verlag Dr. Müller, 2010

Synopsis

Clarida and Taylor (1993) and Clarida et al. (2001) offer a new alternative for nominal spot exchange-rate forecasting. They show that they can improve on forecasting the spot exchange rate over the random walk by using the combination of the full term structure of forward premia and a non-linear model. This study proposes an extension of the Clarida and Taylor framework by developing a Markov?switching model where the dynamics of the spot and forward exchange rate is tied to the term structure of interest rates. We motivate theoretically how an endogenous Markov switching model will emerge from a small open economy monetary model of exchange rate determination augmented with a monetary policy rule. And we estimate the resulting closed?form solution of the model with a Markov?switching vector error?correction model with a time?varying transition probability matrix. We show that our model can improve substantially over Clarida et al. (2001) model for certain currencies. Particularly on currencies for which the interest rate term structure has a strong relationship to the realized inflation regime.

Les informations fournies dans la section « Synopsis » peuvent faire référence à une autre édition de ce titre.

Présentation de l'éditeur

Clarida and Taylor (1993) and Clarida et al. (2001) offer a new alternative for nominal spot exchange-rate forecasting. They show that they can improve on forecasting the spot exchange rate over the random walk by using the combination of the full term structure of forward premia and a non-linear model. This study proposes an extension of the Clarida and Taylor framework by developing a Markov?switching model where the dynamics of the spot and forward exchange rate is tied to the term structure of interest rates. We motivate theoretically how an endogenous Markov switching model will emerge from a small open economy monetary model of exchange rate determination augmented with a monetary policy rule. And we estimate the resulting closed?form solution of the model with a Markov?switching vector error?correction model with a time?varying transition probability matrix. We show that our model can improve substantially over Clarida et al. (2001) model for certain currencies. Particularly on currencies for which the interest rate term structure has a strong relationship to the realized inflation regime.

Les informations fournies dans la section « A propos du livre » peuvent faire référence à une autre édition de ce titre.

Éditeur
VDM Verlag Dr. Müller
Date d'édition
2010
Langue
anglais
ISBN 10 
3639152867
ISBN 13 
9783639152869
Reliure
Broché
Nombre de pages
496
Coordonnées du fabricant
non disponible
Personne responsable
non disponible