Application of Taylor Rule Fundamentals in Forecasting Exchange Rates

Sources of exchange rate fluctuations with Taylor rule fundamentals

a r t i c l e i n f o This paper investigates the sources of exchange rate fluctuations when monetary policy follows a Taylor rule interest rate reaction function. We first present a simple dynamic exchange rate model with Taylor rule fundamentals which is triangular in the long-run impacts of shocks to the output market, the interest rate differential, and the Taylor rule. We then proceed to a...

Nonlinearity In Exchange Rates and Forecasting

Forecasting Disconnected Exchange Rates

Catalyzed by the work of Meese and Rogoff (1983), a large literature has documented the inability of empirical models to accurately forecast exchange rates out-of-sample. This paper extends the literature by introducing an empirical strategy that endogenously builds forecast models from a broad set of conventional exchange rate signals. The method is extremely flexible, allowing for potentially...

An Application of Genetic Programming to Forecasting Foreign Exchange Rates

There is a great need for accurate predictions of foreign exchange rates. Many industries participate in foreign exchange scenarios with little idea where the exchange rate is moving, and what the optimum decision to make at any given time is. Although current economic models do exist for this purpose, improvements could be made in both their flexibility and adaptability. This provides much roo...

Comment on "Taylor Rule Exchange Rate Forecasting During the Financial Crisis"

In this note we discuss the paper on exchange rate forecasting by Molodtsova and Papell (2012). In particular we discuss issues related to forecast origins and forecast horizons when higher frequency exchange rate movements are predicted using lower frequency quarterly macroaggregates. JEL Nos.: C53, C12, C52