Identifying and Modelling Nonlinearities in Australian Foreign Exchange Rate Data by Means of Flexible Nonlinear Inference PDF Download

Author: R. Becker
Publisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 38

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Author: R. Becker
Publisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 38

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Author: Li Cui
Publisher: International Monetary Fund
ISBN: 1451975384
Category : Business & Economics
Languages : en
Pages : 26

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Australia has enjoyed fifteen years of uninterrupted economic expansion since 1992 despite shocks such as the Asian crisis in 1997-98 and the information technology bust in 2000-01. This resilient economic performance owes much to wide-ranging structural reforms and the improved frameworks for monetary and fiscal policies that were implemented after the Australian dollar was floated in 1983. In addition to gaining the expected macroeconomic benefits from exchange rate flexibility, the float appeared to help motivate and facilitate the subsequent reforms. Australia's experience with adapting to a floating currency may therefore be of broader interest.

Author: Lucio Sarno
Publisher: International Monetary Fund
ISBN: 1451853491
Category : Business & Economics
Languages : en
Pages : 40

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This paper provides a selective overview of nonlinear exchange rate models recently proposed in the literature and assesses their contribution to understanding exchange rate behavior. Two key questions are examined. The first question is whether nonlinear autoregressive models of real exchange rates help resolve the "purchasing power parity (PPP) puzzles." The second question is whether recently developed nonlinear, regime-switching vector equilibrium correction models of the nominal exchange rate can beat a random walk model, the standard benchmark in the exchange rate literature, in terms of out-of-sample forecasting performance. Finally, issues related to the adequateness of standard methods of evaluation of (linear and nonlinear) exchange rate models are discussed with reference to different forecast accuracy criteria.

Author: Jan C. Ruelke
Publisher:
ISBN:
Category :
Languages : en
Pages : 48

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This paper applies nonlinear econometric models to empirically investigate the effectiveness of the Reserve Bank of Australia (RBA) exchange rate policy. First, results from a STARTZ model are provided revealing nonlinear mean reversion of the Australian dollar exchange rate in the sense that mean reversion increases with the degree of exchange rate misalignment. Second, a STR-GARCH model suggests that RBA interventions account for this result by strengthening foreign exchange traders' confidence in fundamental analysis. This in line with the so-called coordination channel of intervention effectiveness.

Author: Serineh Najarian
Publisher: International Monetary Fund
ISBN: 1451857691
Category : Business & Economics
Languages : en
Pages : 50

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This paper examines whether deviations from PPP are stationary in the presence of nonlinearity, and whether the adjustment toward PPP is symmetric from above and below. Using alternative nonlinear models, our results support mean reversion and asymmetric adjustment dynamics. We find differences in magnitudes, frequencies, and durations of the deviations of exchange rates from fixed and time-varying thresholds, both between over-appreciations and over-depreciations and between developed and developing countries. In particular, the average cumulative sum of deviations during periods when exchange rates are below forecasts is twice that of the sum during periods of over-appreciation, and is larger for developing than for advanced countries.

Author: Yongmiao Hong
Publisher:
ISBN:
Category :
Languages : en
Pages : 33

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It is often documented, based on autocorrelation, variance ratio and power spectrum, that exchange rates approximately follow a martingale process. Because autocorrelation, variance ratio and spectrum check serial uncorrelatedness rather than martingale difference, they may deliver misleading conclusions in favor of the martingale hypothesis when the test statistics are insignificant. In this paper, we explore whether there exists a gap between serial uncorrelatedness and martingale difference for exchange rate changes, and if so, whether nonlinear time series models admissible in the gap can outperform the martingale model in out-of-sample forecasts. Applying the generalized spectral tests of Hong (1999) to five major exchange rates, we find that the changes of exchange rates are often serially uncorrelated, but there exists strong nonlinearity in conditional mean, in addition to the well-known volatility clustering. To forecast the conditional mean, we consider the linear autoregressive, autoregressive polynomial, artificial neural network and functional-coefficient models, as well as their combination. The functional coefficient model allows the autoregressive coefficients to depend on investment positions via an moving average technical trading rule. We evaluate out-of-sample forecasts of these models relative to the martingale model, using four criteria-the mean squared forecast error, the mean absolute forecast error, the mean forecast trading return, and the mean correct forecast direction. White's (2000) reality check method is used to avoid data-snooping bias. It is found that some nonlinear models, particularly their combination, do have superior predictive ability over the martingale model for some currencies in terms of certain forecast evaluation criteria.

Author: Paolo Guarda
Publisher:
ISBN:
Category : Foreign exchange
Languages : en
Pages : 56

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Author: Suk-Joong Kim
Publisher:
ISBN:
Category : Banks and banking, Central
Languages : en
Pages : 34

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Author: Richard Meese
Publisher:
ISBN:
Category : Foreign exchange
Languages : en
Pages : 62

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