We investigate the significance of fundamentals variables and uncertainty of appropriate models in one-, two-, four-, and eight-quarter ahead forecasts of quarterly yen-dollar real exchange rates by using 16 fundamentals-based models and the random walk model. Our empirical results show...

We construct factors from a cross section of exchange rates and use the idiosyncratic deviations from the factors to forecast. In a stylized data generating process, we show that such forecasts can be effective even if there is essentially no serial correlation in the univariate exchange rate...

Factor analysis performed on a panel of 23 nominal exchange rates from January 1999 to December 2010 yields three common factors. This paper identifies the euro/dollar, Swiss- franc/dollar and yen/dollar exchange rates as empirical counterparts to these common factors. These empirical factors...

This paper proposes a new method for forecast selection from a pool of many forecasts. The method uses conditional information as proposed by Giacomini and White (2006). It also extends their pairwise switching method to a situation with many forecasts. I apply the method to the monthly...

This paper develops asymptotic econometric theory to help understand data generated by a present value model with a discount factor near one. A leading application is to exchange rate models. A key assumption of the asymptotic theory is that the discount factor approaches 1 as the sample size...

We provide a systematic comparison of the out-of-sample forecasts based on multivariate macroeconomic models and forecast combinations for the euro against the US dollar, the British pound, the Swiss franc and the Japanese yen. We use profit maximization measures based on directional accuracy...

This study examines the real exchange rate determination in Malaysia. The result of the autoregressive distributed lag approach shows that an increase in the real interest rate differential, productivity differential, the real oil price or reserve differential will lead to an appreciation of the...

Based on Cheung, Chinn and García-Pascual (2004) and Meese and Rogoff (1983), the forecasting performance of a wide variety of theoretical and empirical exchange rate models (PPP, UIP, flexible and sticky-price monetary models, portfolio balance, and a BEER model) is tested against the random...

In this paper, we examine whether pre-crisis leading indicators help explain pressures on the exchange rate (and its volatility) during the globalfinancial crisis. We use a unique data set that covers 149 countries and 58 indicators, and estimation techniques that are robust to model...