Exchange rates forecasting model: an alternative estimation procedure
This study proposes an alternative procedure for modelling exchange rates behaviour, which is a linear combination of a long-run function and a short-run function. Our procedure involves modelling of the long-run relationship and this is followed by the short-run function. Among all the possible co...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Universiti Putra Malaysia Press
2004
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| Online Access: | http://psasir.upm.edu.my/id/eprint/3663/ http://psasir.upm.edu.my/id/eprint/3663/1/Exchange_Rates_Forecasting_Model_An.pdf |
| _version_ | 1848839592061435904 |
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| author | Baharumshah, Ahmad Zubaidi Liew, Khim Sen Lim, Kian Ping |
| author_facet | Baharumshah, Ahmad Zubaidi Liew, Khim Sen Lim, Kian Ping |
| author_sort | Baharumshah, Ahmad Zubaidi |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | This study proposes an alternative procedure for modelling exchange rates behaviour, which is a linear combination of a long-run function and a short-run function. Our procedure involves modelling of the long-run relationship and
this is followed by the short-run function. Among all the possible combinations of modelling techniques, we proposed the simplest form, namely modelling the long-run function by the well established purchasing power parity (PPP) based
model and setting up the short-run function based on its time series properties. Results of this study suggest that our procedure yields powerful forecasting models as they easily outperform the simple random walk model-which is rarely defeated in the literature of exchange rate forecasting-in terms of out-of-sample forecasting, for all the forecast horizons ranging from one to fourteen quarters.
This study provides us with some hope of achieving a reasonable forecast for the ASEAN currencies using the fundamental monetary model just by a simple adaptation. |
| first_indexed | 2025-11-15T07:13:54Z |
| format | Article |
| id | upm-3663 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T07:13:54Z |
| publishDate | 2004 |
| publisher | Universiti Putra Malaysia Press |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-36632016-02-12T08:19:50Z http://psasir.upm.edu.my/id/eprint/3663/ Exchange rates forecasting model: an alternative estimation procedure Baharumshah, Ahmad Zubaidi Liew, Khim Sen Lim, Kian Ping This study proposes an alternative procedure for modelling exchange rates behaviour, which is a linear combination of a long-run function and a short-run function. Our procedure involves modelling of the long-run relationship and this is followed by the short-run function. Among all the possible combinations of modelling techniques, we proposed the simplest form, namely modelling the long-run function by the well established purchasing power parity (PPP) based model and setting up the short-run function based on its time series properties. Results of this study suggest that our procedure yields powerful forecasting models as they easily outperform the simple random walk model-which is rarely defeated in the literature of exchange rate forecasting-in terms of out-of-sample forecasting, for all the forecast horizons ranging from one to fourteen quarters. This study provides us with some hope of achieving a reasonable forecast for the ASEAN currencies using the fundamental monetary model just by a simple adaptation. Universiti Putra Malaysia Press 2004 Article PeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/3663/1/Exchange_Rates_Forecasting_Model_An.pdf Baharumshah, Ahmad Zubaidi and Liew, Khim Sen and Lim, Kian Ping (2004) Exchange rates forecasting model: an alternative estimation procedure. Pertanika Journal of Science & Technology, 12 (1). pp. 149-172. ISSN 0128-7680; ESSN: 2231-8526 |
| spellingShingle | Baharumshah, Ahmad Zubaidi Liew, Khim Sen Lim, Kian Ping Exchange rates forecasting model: an alternative estimation procedure |
| title | Exchange rates forecasting model: an alternative estimation procedure |
| title_full | Exchange rates forecasting model: an alternative estimation procedure |
| title_fullStr | Exchange rates forecasting model: an alternative estimation procedure |
| title_full_unstemmed | Exchange rates forecasting model: an alternative estimation procedure |
| title_short | Exchange rates forecasting model: an alternative estimation procedure |
| title_sort | exchange rates forecasting model: an alternative estimation procedure |
| url | http://psasir.upm.edu.my/id/eprint/3663/ http://psasir.upm.edu.my/id/eprint/3663/1/Exchange_Rates_Forecasting_Model_An.pdf |