Browse

Hysteresis and Averaging the Forecasts of Exchange Rates

Cited 0 time in Web of Science Cited 0 time in Scopus
Authors
Seo, Byeongseon; Kim, Jinho
Issue Date
2011-07
Publisher
Institute of Economic Research, Seoul National University
Citation
Seoul Journal of Economics, Vol.24 No.3, pp. 333-355
Keywords
Forecast combinationHysteresisInstabilityPersistence
Abstract
Real exchange rates evolve independently of money supply shocks

in accordance with long-run monetary neutrality. However, the prolonged

disequilibrium errors of the Korean won―US dollar real exchange

rates in the 1990s prior to the Asian financial crisis and the

hike subsequent to the crisis indicate hysteresis of the real exchange

rates. The hysteresis may originate from two sources, namely, the

instability of the equilibrium relationship and the regime-dependent

persistence of real exchange rates. The current paper provides a

statistical evaluation of the hysteresis in the won―dollar real exchange

rates using forecast combination. The behavior of asymmetric

mean reversion and regime-dependent persistence dominates the

parameter instability in real exchange rates. A substantial improvement

in predictive accuracy is observed as the forecasting model incorporates

the hysteresis effect.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/74498
Files in This Item:
Appears in Collections:
College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.24 no.1/4 (2011)
  • mendeley

Items in S-Space are protected by copyright, with all rights reserved, unless otherwise indicated.

Browse