Journal
JOURNAL OF INTERNATIONAL FINANCIAL MARKETS INSTITUTIONS & MONEY
Volume 44, Issue -, Pages 21-34Publisher
ELSEVIER
DOI: 10.1016/j.intfin.2016.04.007
Keywords
Exchange rate; Cointegration; Forecasting; Dynamic models
Categories
Ask authors/readers for more resources
The finding that error correction models do not forecast better than the corresponding first difference models has been explained predominantly in terms of errors in the estimation of the adjustment mechanism. We argue against the proposition that the restrictions implied by economic theory must be imposed to enhance forecasting power because the underlying theory may not be necessarily valid. We put forward the proposition that an ECM and the corresponding first difference model have similar dynamic structures, which means that the relative performance of the two models is an empirical issue. The results do support this proposition and have some practical implications. (C) 2016 Elsevier B.V. All rights reserved.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available