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Identification and Estimation of Exchange Rate Models with Unobservable Fundamentals

Chambers, MJ and McCrorie, JR (2004) Identification and Estimation of Exchange Rate Models with Unobservable Fundamentals. UNSPECIFIED. Tilburg University, Center for Economic Research, Discussion Papers 2004-38.

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Abstract

This paper is concerned with issues of model specification, identification, and estimation in exchange rate models with unobservable fundamentals.We show that the model estimated by Gardeazabal, Reg�lez and V�zquez(International Economic Review, 1997) is not identified and demonstrate how to specify an identified model in-keeping with their intended approach.Estimates of the identified model are reported for five currencies over two time spans, and a restriction suggested by the asset market view of exchange rate determination is not rejected for any currency or time span.The forecasting performance of the model is also examined and is found to compare favourably with forecasts generated by a random walk with drift.

Item Type: Monograph (UNSPECIFIED)
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 09 Jul 2012 22:09
Last Modified: 17 Aug 2017 18:11
URI: http://repository.essex.ac.uk/id/eprint/2756

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