Byrne, J., Korobilis, D. and Ribeiro, P. J. (2016) Exchange rate predictability in a changing world. Journal of International Money and Finance, 62, pp. 1-24. (doi: 10.1016/j.jimonfin.2015.12.001)
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Abstract
An expanding literature articulates the view that Taylor rules are helpful in predicting exchange rates. In a changing world, however, Taylor rule parameters may be subject to structural instabilities, for example in the aftermath of the Global Financial Crisis. This paper forecasts exchange rates using Taylor rules with Time-Varying Parameters (TVP) estimated by Bayesian methods. Focusing on the data from the crisis, we improve upon the random walk for at least half, and for as many as seven out of 10, of the currencies considered. Results are stronger when we allow the TVP of the Taylor rules to differ between countries.
| Item Type: | Articles |
|---|---|
| Status: | Published |
| Refereed: | Yes |
| Glasgow Author(s) Enlighten ID: | Korompilis Magkas, Professor Dimitris and Byrne, Dr Joseph |
| Authors: | Byrne, J., Korobilis, D., and Ribeiro, P. J. |
| Subjects: | H Social Sciences > HG Finance |
| College/School: | College of Social Sciences > Adam Smith Business School > Economics |
| Journal Name: | Journal of International Money and Finance |
| Publisher: | Pergamon Press |
| ISSN: | 0261-5606 |
| ISSN (Online): | 1873-0639 |
| Copyright Holders: | Copyright © 2015 Elsevier Ltd. |
| First Published: | First published in Journal of International Money and Finance 62:1-24 |
| Publisher Policy: | Reproduced in accordance with the copyright policy of the publisher |
| Related URLs: |
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