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 during the Global Financial Crisis. This paper forecasts exchange rates using such...

We analyse the role of time-variation in coefficients and other sources of uncertainty in exchange rate forecasting regressions. Our techniques incorporate the notion that the relevant set of predictors and their corresponding weights, change over time. We find that predictive models which allow...

We use factor augmented vector autoregressive models with time-varying coefficients to construct a financial conditions index. The time-variation in the parameters allows for the weights attached to each financial variable in the index to evolve over time. Furthermore, we develop methods for...

Indeed, the specification of equilibrium in the world economy depends on the exchange rate regime and thus, the early contributions to the postwar literature on exchange rate economics are to a large extent concerened with the role of speculation in foreign exchange markets. However, the world...

We use Bayesian factor regression models to construct a financial conditions index (FCI) for the U.S. Within this context we develop Bayesian model averaging methods that allow the data to select which variables should be included in the FCI or not. We also examine the importance of different...

This paper introduces several new Bayesian nonparametric models suitable for capturing the unknown conditional distribution of realized covariance (RCOV) matrices. Existing dynamic Wishart models are extended to countably infinite mixture models of Wishart and inverse-Wishart distributions. In...

This paper compares the forecasting performance of three structural econometric models, namely the non-parametric, ARIMAX and the Kalman filter models, in predicting stock returns in an emerging market economy using South Africa as case study. The proposed models have different functional forms....

In the Schumpeterian creative disruption age, the authors firmly believe that an increasing application of electronic technologies in the finances opens a big number of new unlimited opportunities toward a new era of the ultra high frequency electronic trading in the foreign currencies exchange...

In the Schumpeterian creative disruption age, the authors firmly believe that an increasing application of electronic technologies in the finances opens a big number of new unlimited opportunities toward a new era of the ultra high frequency electronic trading in the foreign currencies exchange...