Exchange Rates Predictability in Developing Countries

MPRA Paper from University Library of Munich, Germany

Abstract: The main objective of this study is to re-investigates the exchange rates predictability puzzle using monetary model. It is hypothesised that the performance of exchange rate predictability is better off in countries with monetary instability. We employ bootstrap technique as proposed by Kilian (1999) to alleviate statistical inference intricacies inherit in the long horizon forecasting for three different monetary models (flexible price, sticky price and relative price) for selected developing economies. The empirical result shows the superiority of sticky price model along with the evidence of exchange rate predictability for high inflation economies.

Keywords: Foreign exchange; international finance; forecasting (search for similar items in EconPapers)
JEL-codes: C53 F31 (search for similar items in EconPapers)
Date: 2008-01-22
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Citations: View citations in EconPapers (2)

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