Publications
Detailed Information
Hysteresis and Averaging the Forecasts of Exchange Rates
Cited 0 time in
Web of Science
Cited 0 time in Scopus
- Authors
- Issue Date
- 2011-07
- Citation
- Seoul Journal of Economics, Vol.24 No.3, pp. 333-355
- Keywords
- Forecast combination ; Hysteresis ; Instability ; Persistence
- 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
- Files in This Item:
Item View & Download Count
Items in S-Space are protected by copyright, with all rights reserved, unless otherwise indicated.