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Testing the Taylor Model Predictability for Exchange Rates in Latin America
| Content Provider | Semantic Scholar |
|---|---|
| Author | Moura, Marcelo Leite |
| Copyright Year | 2010 |
| Abstract | Exchange rates forecasting performance is tested by a model which incorporates endogenous monetary policy through a Taylor rule reaction function. Other usual monetary and equilibrium empirical exchange rate models are also evaluated for comparison purposes. Predictability is tested by comparing the models to a benchmark random walk specification. We contribute to the recent literature in many ways. First, we include models of forward-looking endogenous monetary policy to the exchange rate forecasting exercise, the Taylor model. Second, our data, set across countries, is uniform in terms of economies adopting both inflation targeting and a flexible exchange rate. Third, our study sheds light on exchange rate determinants for emerging economies: Brazil, Chile, Colombia, Peru and Mexico. Our results show strong predictability evidence for the Taylor model and indicate that assuming models of endogenous monetary policy and the present value of expected fundamentals is a rewarding strategy to model exchange rate determination. |
| Starting Page | 547 |
| Ending Page | 564 |
| Page Count | 18 |
| File Format | PDF HTM / HTML |
| DOI | 10.1007/s11079-008-9098-0 |
| Volume Number | 21 |
| Alternate Webpage(s) | http://epge.fgv.br/finrio/myreview/FILES/CR2/p41.pdf |
| Alternate Webpage(s) | https://doi.org/10.1007/s11079-008-9098-0 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
