Hysteresis and Averaging the Forecasts of Exchange RatesHysteresis and Averaging the Forecasts of Exchange Rates
- Other Titles
- Hysteresis and Averaging the Forecasts of Exchange Rates
- Authors
- 서병선; Jinho Kim
- Issue Date
- 2011
- Publisher
- 서울대학교 경제연구소
- Keywords
- Forecast combination; Hysteresis; Instability; Persistence; Forecast combination; Hysteresis; Instability; Persistence
- Citation
- Seoul Journal of Economics, v.24, no.3, pp.333 - 355
- Indexed
- KCI
- Journal Title
- Seoul Journal of Economics
- Volume
- 24
- Number
- 3
- Start Page
- 333
- End Page
- 355
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/114051
- DOI
- 10.22904/sje.2011.24.3.003
- ISSN
- 1225-0279
- Abstract
- Real exchange rates evolve independently of money supply shocks in accordance with long-run monetary neutrality. However, the prolonged disequilibrium errors of the Korean won―US dollar real exchange rates in the 1990s prior to the Asian financial crisis and the hike subsequent to the crisis indicate hysteresis of the real exchange rates. The hysteresis may originate from two sources, namely, the instability of the equilibrium relationship and the regime-dependent persistence of real exchange rates. The current paper provides a statistical evaluation of the hysteresis in the won―dollar real exchange rates using forecast combination. The behavior of asymmetric mean reversion and regime-dependent persistence dominates the parameter instability in real exchange rates. A substantial improvement in predictive accuracy is observed as the forecasting model incorporates the hysteresis effect.
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Collections - College of Life Sciences and Biotechnology > Department of Food and Resource Economics > 1. Journal Articles
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