search query: @indexterm EXCHANGE RATES / total: 1242
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| Author: | Dacco, R. Satchell, S. |
| Title: | Forward and spot exchange rates in a bivariate TAR framework |
| Journal: | European Journal of Finance
2001 : JUN, VOL. 7:2, p. 131-143 |
| Index terms: | FINANCE EXCHANGE RATES MODELS EMPIRICAL RESEARCH |
| Language: | eng |
| Abstract: | Structural exchange rate models explain only a small part of the movements in dollar exchange rate. Recent empirical work has focused on the failure to account for nonlinearities in the data generating mechanism, as an explanation of this bad performance. Here two bivariate threshold autoregressive models for the spot and forward exchange rates are considered. In the first model the regimes are determined by the log difference of the two rates; in the second one the regimes are driven by the forward spot no-arbitrage condition. These processes are able to capture the 'swing' behaviour observed in the exchange rate market. Finally the forecasting ability of the models for the dollar/DM exchange rate is evaluated by stochastic simulation. |
SCIMA