Many authors have documented that it is challenging to explain exchange rate fluctuations with macroeconomic fundamentals: a random walk forecasts future exchange rates better than existing macroeconomic models. This paper applies newly developed tests for nested model that are robust to the...

Many authors have documented that it is challenging to explain exchange rate fluctuations with macroeconomic fundamentals: a random walk forecasts future exchange rates better than existing macroeconomic models. This paper applies newly developed tests for nested model that are robust to the...

This paper extends and generalizes the BDS test presented by Brock, Dechert, Scheinkman, and LeBaron (1996). In doing so it aims to remove the limitation of having to arbitrarily select a proximity parameter by integrating across the correlation integral. The Monte Carlo simulation is used to...

It is well documented that macroeconomic fundamentals are little help in predicting changes in the nominal exchange rates compared to the predictions made by a simple random walk. Letta and Ludvigson (2001) find that fluctuations in the common long-term trend in consumption, asset wealth, and...

The ECB recommends to prospective euro-area members that they choose the central parities, for fixing their currencies against the euro, consistent with a broad range of economic indicators while taking account of the market rate as well. In this paper, we estimate a behavioral model of the real...

The behavioural equilibrium exchange rate (BEER) model of the Czech koruna is derived in this paper and estimated by three methods suitable for non-stationary time series. The considered potential determinants of the real equilibrium exchange rate are the productivity differential, the interest...

In this paper we extend the macroeconometric model developed in Bagnai (2004) by linking it to a submodel for the Japanese economy, and we utilize this extended model to investigate several hypotheses of reduction in the US twin deficits. The Japanese submodel is specified and estimated along...

The study examines the reasons for financial crises in 31 emerging market countries during 1980-2001. It estimates a probit model using 23 macroeconomic and financial sector variables. Traditional variables such as unemployment and inflation, as well as several indicators of indebtedness such as...

An important factor that helps distinquish between alternative balance of payments theories is the assumed causal relationship between the domestic credit and reserve components of a country's monetary base. This paper reports test results of this causal relationship in Austrailia, Belgium,...

Indicators of financial crisis generally do not have a good track record. This paper presents an early warning system (EWS) for six countries in Asia in which indicators do work. Our binary choice model, which has been estimated for the period 1970:01–2001.12, has the following features. We...