Work

Forecasting nominal exchange rates using a dynamic model averaging framework

Year: 2024

Type: article

Abstract: This paper presents a dynamic model averaging approach for forecasting nominal exchange rates. This framework encompasses most of the approaches commonly used in the forecasting literature and also allows us to study parameters and model uncertainty in exchange rate forecasting. We focus on nine major trading currency pairs: AUD/USD, CAD/USD, CHF/USD, EUR/USD, GBP/USD, NOK/USD, NZD/USD, SEK/USD, and JPY/USD, where we use data for approximately the last two decades. We empirically show statistically and economically significant exchange rate predictability in the medium and long run, and we also present some findings on predictability even in the short run. We offer several theoretical explanations for these results on predictability.

Source: Heliyon

DOI: 10.1016/j.heliyon.2024.e39112

Author: Martin Časta

Institutions: Czech National Bank, Prague University of Economics and Business

Language: English

Topic: Forecasting Techniques and Applications

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $2,100

Funder: Vysoká Škola Ekonomická v Praze