The Monetary Model of Exchange Rates is Better than the Random Walk in Out-Of-Sample Forecasting
It is demonstrated that the monetary model of exchange rates is better than the random walk in out-of-sample forecasting if forecasting accuracy is measured by metrics that take into account the magnitude of the forecasting errors and the ability of the model to predict the direction of change. It i...
| Main Authors: | , |
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| Format: | Journal Article |
| Published: |
Routledge
2013
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| Subjects: | |
| Online Access: | http://hdl.handle.net/20.500.11937/15067 |
| _version_ | 1848748794693287936 |
|---|---|
| author | Moosa, I. Burns, Kelly |
| author_facet | Moosa, I. Burns, Kelly |
| author_sort | Moosa, I. |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | It is demonstrated that the monetary model of exchange rates is better than the random walk in out-of-sample forecasting if forecasting accuracy is measured by metrics that take into account the magnitude of the forecasting errors and the ability of the model to predict the direction of change. It is suggested that such a metric is the numerical value of the Wald test statistic for the joint coefficient restriction implied by the line of perfect forecast. The results reveal that the monetary model outperforms the random walk in out-of-sample forecasting for four different exchange rates. |
| first_indexed | 2025-11-14T07:10:42Z |
| format | Journal Article |
| id | curtin-20.500.11937-15067 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T07:10:42Z |
| publishDate | 2013 |
| publisher | Routledge |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-150672017-09-13T15:55:19Z The Monetary Model of Exchange Rates is Better than the Random Walk in Out-Of-Sample Forecasting Moosa, I. Burns, Kelly random walk forecasting monetary model direction accuracy It is demonstrated that the monetary model of exchange rates is better than the random walk in out-of-sample forecasting if forecasting accuracy is measured by metrics that take into account the magnitude of the forecasting errors and the ability of the model to predict the direction of change. It is suggested that such a metric is the numerical value of the Wald test statistic for the joint coefficient restriction implied by the line of perfect forecast. The results reveal that the monetary model outperforms the random walk in out-of-sample forecasting for four different exchange rates. 2013 Journal Article http://hdl.handle.net/20.500.11937/15067 10.1080/13504851.2013.799753 Routledge restricted |
| spellingShingle | random walk forecasting monetary model direction accuracy Moosa, I. Burns, Kelly The Monetary Model of Exchange Rates is Better than the Random Walk in Out-Of-Sample Forecasting |
| title | The Monetary Model of Exchange Rates is Better than the Random Walk in Out-Of-Sample Forecasting |
| title_full | The Monetary Model of Exchange Rates is Better than the Random Walk in Out-Of-Sample Forecasting |
| title_fullStr | The Monetary Model of Exchange Rates is Better than the Random Walk in Out-Of-Sample Forecasting |
| title_full_unstemmed | The Monetary Model of Exchange Rates is Better than the Random Walk in Out-Of-Sample Forecasting |
| title_short | The Monetary Model of Exchange Rates is Better than the Random Walk in Out-Of-Sample Forecasting |
| title_sort | monetary model of exchange rates is better than the random walk in out-of-sample forecasting |
| topic | random walk forecasting monetary model direction accuracy |
| url | http://hdl.handle.net/20.500.11937/15067 |