A major puzzle in international finance is the inability of models based on monetary fundamentals to produce better out-of-sample forecasts of the nominal exchange rate than a naive random walk. While prior research has generally evaluated exchange rate forecasts using conventional statistical...

This paper examines the dynamic relationship between the bilateral exchange rates of 10 Central and Eastern European emerging markets against the euro and their fundamentals, using data from the early 1990s to the middle of 2010, within the framework provided by the monetary model of exchange...

A large literature suggests that standard exchange rate models cannot outperform a random walk forecast and that the forward rate is not an optimal predictor of the spot rate. There is evidence, however, that the term structure of forward premia contains valuable information for forecasting...

This paper provides a comprehensive evaluation of the short-horizon predictive ability of economic fundamentals and forward premia on monthly exchange rate returns in a framework that allows for volatility timing. We implement Bayesian methods for estimation and ranking of a set of empirical...

This study evaluates the short-run and long-run performance of the monetary model approach of exchange rate determination for the emerging economies like Argentina, Brazil, Taiwan and Turkey. The study is based on whether there is a cointegration relationship between the nominal exchange rate...

How well does the monetary exchange rate model explain exchange rate behaviour in Nigeria? Using the Johansen -Juselius (1990) and Johansen (1991) cointegration technique, this paper examines the long-run validity of the monetary exchange rate model in Nigeria for the flexible exchange rate...

This study investigates exchange rate movements in the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS) and in the Exchange Rate Mechanism II (ERM-II). On the basis of the variant of the target zone model proposed by Bartolini and Prati (1999) and Bessec (2003), we set up a...

This paper investigates the relationship between the euro-dollar exchange rate and its underlying fundamentals. First, we develop a simple theoretical model in which chartists and fundamentalists interact. This model predicts the existence of different regimes, and thus nonlinearities in the...

From Olsen Financial Studies data on the Euro-Dollar currency pair (2008-2010), we conduct a time-series analysis to explain the role of trading volume on exchange rate volatility (Mixture Distribution Hypothesis), taking into account non-linearity. We find evidence that the MDH holds in...

This study investigates the relationship between the euro-dollar exchange rate and its underlying fundamentals by adopting non-linear time series modelling. We found that this relationship is episodically unstable. We also found that an equilibrium-distorting shock is likely to have a greater...