Jiménez Martín, Juan Ángel and Flores de Frutos, Rafael (2004) The fit of dynamic equilibrium models of exchange rate. [Working Paper or Technical Report]
Official URL: http://eprints.ucm.es/7725/
The two-country monetary model has become a fundamental tool for explaining the behavior of the exchange rate. However, the popularity of this approach is not justified by its empirical support. One of the reasons for the empirical “failure” of exchange rate models could be the econometric approach applied. In this paper, an alternative procedure for evaluating the fit of dynamic equilibrium models of exchange rate is suggested. This approach is applied to three theoretical models: Lucas (1982), Svensson (1985), and Grilli and Roubini (1992).
|Item Type:||Working Paper or Technical Report|
|Additional Information:||JEL classification: F31, F37, G15|
|Uncontrolled Keywords:||Exchange rate, Equilibrium model, Seasonality|
|Subjects:||Social sciences > Economics > Econometrics|
|Series Name:||Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE)|
Altug, S., 1983. “Gestion lags and the business cycle: an empirical analysis”, Carnegie-Mellon Working Paper , presented in The Econometric Society meeting, Stanford University, Carnegie-Mellon University, Pittsburgh, PA.
Arrow, K. J., 1971. Essays in the Theory of Risk-Bearing, North-Holland, Amsterdam.
Bakshi, G., Chen, Z., 1997. “Equilibrium valuation of Foreign Exchange Claims”, The Journal of Finance, 52, 799-826.
Bekaert, G., 1994. “Exchange rate volatility and deviations from unbiasedness in cash-in-advance model”, Journal of International Economic, 36, 29-52.
Box, G.E.P., Jenkins, G. M., 1970. Time Series Analysis, Forecasting and Control, ed. HoldenDay, San Francisco.
Box, G. E. P., Tiao, G. C., 1975. Intervention Analysis with applications to economic and environmental problems”, Journal of American Statistical Association, 70, 70-79.
Cao, M., 2001. “Systematic jump risk in a small open economy: simultaneous equilibrium valuation of options on the market portfolio and exchange rate”, Journal of International Money and Finance, 20, 191-218.
Chinn, M. D., Meese, R. A., 1995. “Banking on currency forecasts: How predictable is change in money”, Journal of International Economics, 38, 161-178.
Dutton, J., 1993. “Real and Monetary Shocks and risk premia in forward markets for foreign exchange”, Journal of Money, Credit, and Banking, 25, 731-754.
Engel, C., 1992b. “The risk premium and the liquidity premium in foreign exchange markets”, International Economic Review, 33, 871-879.
Engel, C., 1992a. “On the foreign exchange risk premium in a general equilibrium model”, Journal of International Economics, 32, 305-319.
Friend, I., Blume, M. E., 1975. “The demand for risky assets”, American Economic Review, 65, 900-922.
Grilli, V., Roubini, N., 1992. “Liquidity and exchange rates”, Journal of International Economics, 33, 339-352.
Hansen, L. P., Singleton, K. J., 1982. “Generalized instrumental variables estimation of nonlinear rational expectations models”, Econometrica, 50 (5), 1269-1286.
Helpman, E., Razin, A., 1982. “A comparison of exchange rate regimes in the presence of imperfect capital markets”, International Economic Review, 23, 365-88.
Helpman, E., Razin, A., 1979. “Towards a consistent comparison of alternative exchange rate systems”, Canadian Journal of Economics, 12, 394-409.
Hildreth, C., Knowles, G. J., 1986. “Farmers' Utility Functions”, en Bayesian Inference and Decision Techniques: Essays in Honor of Bruno de Finetti. Studies in Bayesian
Econometrics and Statistics Series, 6, Amsterdam and Oxford: North-Holland; distributed in the U.S. and Canada by Elsevier Science, New York, in Goel, P. and Zellner, A. (ed.), 291-317.
Hodrick, R. J., 1989. “Risk uncertainty, and exchange rates”, Journal of Monetary Economics, 23, 433-459.
Hu, X., 1997. “Macroeconomic Uncertainty and risk premium in the foreign exchange market”, Journal of International Money and Finance, 16, 699-718.
Kaminsky, G., Peruga, R., 1990. “Can a time-varying risk premium explain excess returns in the forward market for foreign exchange?”, Journal of International Economics, 28, 47-70.
Kehoe, T., 1983. “Dynamics of the current account: theoretical and empirical analysis”, Working Paper, Harvard University, Cambridge, MA.
Kim, S., Roubini, N., 2000. “Exchange anomalies in the industrial countries: a solution with a sturctural VAR approach”, Journal of Monetary Economics, 45, 561-586.
Kydland, F. E., Prescott, E. C., 1982. “Time to Build and Aggregate Fluctuations”, Econometrica, 50, 1345-1370.
Lucas, R. E. JR, 1978. “Asset Prices in an Exchange Economy”, Econometrica, 46, 1429-45.
Lucas, R. E. JR, 1982. “Interest rates and currency prices in a two-country world”, Journal of Monetary Economics, 10, 335-359.
Lucas, R. E. JR, 1990. “Liquidity and interest rates”, Journal of Economic Theory, 50, 237-264.
Meese, R. A., Rogoff, K., 1983b. “The out-of-sample failure of empirical exchange rate models: sampling error or misspecification?”, en Exchange Rates and International
Macroeconomics, in Frenkel, J. (ed.), Chicago, University of Chicago Press.
Meese, R. A., Rogoff, K., 1983a. “Empirical exchange rate models of the seventies: Do they fit out of sample”, Journal of International Economics, 14, 3-24.
Mehra, R., Prescott, E. C., 1985. “The Equity premium: a puzzle”, Journal of Monetary Economics, 15, 145-161.
Prescott, E. C., 1986. “Theory ahead of business-cycle measurement”, Carnegie-Rochester Conference Ser. Public Policy, 25, 11-44.
Roubini, N., Grilli, R., 1995. “Liquidity models in open economies: theory and empirical evidence”, NBER, October, wp. 5313.
Singleton, K. J., 1990. “Specification and estimation of intertemporal asset pricing models”, Handbook of Monetary Economics, Volume I, in Friedman B. M. and Hahn F. H. (eds.).
Stockman, A. C., 1987.“The Equilibrium Approach to exchange rates”, Federal Reserve Bank of Richmond Economic Review; 73(2), 12-30.
Stockman, A. C., 1983.“Real exchange rates under alternative nominal exchange rate systems”, Journal of International Money and Finance, 2(2), 147-166.
Stockman, A. C., 1980. “A theory of exchange rate determination”, Journal of Political Economy, 88, 673-698.
Svensson, L. E. O., 1985. “Currency prices, terms of trade, and interest rates. A general equilibrium asset-pricing cash in advance approach”, Journal of International Economics, 18, 17-41.
Watson, M. W., 1993. “Measures of fit for calibrated models”, Journal of Political Economy, 101, 1011-1041.
Wallis, K. F., 1974. “Seasonal Adjustment and the relation between variables”, Journal of the American Statistical Association, 69, 13-32.
|Deposited On:||11 Mar 2008|
|Last Modified:||06 Feb 2014 07:55|
Repository Staff Only: item control page