Many structural models have attempted to explain the behaviour of exchange rates under the floating rate regime. Meese and Rogoff (1983) found that a random walk model performs at least as well as various structural and time series models for exchange rates in terms of out-of-sample forecast....

In this paper we consider the situation where the deterministic components of the processes generating individual series are linear trends and the individual series are independent I(0) or I(1) processes. We show that when those time series are used in ordinary least square regression, the...

We consider a simple random walk process, a special case ofthe Martingale model, which exhibits a deterministic break in its drift term,for instance, from positive to negative. This particular example can be aplausible model for a time series on exchange rates which displays a persistentcurrency...

The Hodrick-Prescott …lter is often applied to economic series as part of thestudy of business cycles. Its properties have most frequently been exploredthrough the development of essentially asymptotic results which are practicallyrelevant only some distance from series endpoints. Our concern...