Structural Models vs Random Walk: The Case of the Lira/$ Exchange Rate
After presenting the structural models of exchange-rate determination, the authors show that their out-of-sample predictive performance of the lira/$ exchange rate is inferior to that of the random walk model. Only by moving away from these single-equation, semireduced form models toward suitable economywide macroeconometric models can one hope to beat the random walk. Following this course, the authors show that the Mark V version of their continuous time macroeconometric model of the Italian economy outperforms both the existing structural models and the random-walk process in out-of-sample forecasting tests of the lira/$ exchange rate.
Year of publication: |
1990
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Authors: | Gandolfo, Giancarlo ; Padoan, Pietro Carlo ; Paladino, Giovanna |
Published in: |
Eastern Economic Journal. - Eastern Economic Association - EEA, ISSN 0094-5056. - Vol. 16.1990, 2, p. 101-113
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Publisher: |
Eastern Economic Association - EEA |
Saved in:
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