Time-varying Cointegration Models and Exchange Rate Predictability in KoreaTime-varying Cointegration Models and Exchange Rate Predictability in Korea
- Other Titles
- Time-varying Cointegration Models and Exchange Rate Predictability in Korea
- Authors
- 박수경; 박철범
- Issue Date
- 2015
- Keywords
- Exchange rate; Monetary model; Predictability; Purchasing power parity; Time-varying cointegration
- Citation
- KDI Journal of Economic Policy, v.37, no.4, pp.1 - 20
- Indexed
- KCI
- Journal Title
- KDI Journal of Economic Policy
- Volume
- 37
- Number
- 4
- Start Page
- 1
- End Page
- 20
- URI
- https://scholar.korea.ac.kr/handle/2021.sw.korea/95805
- DOI
- 10.23895/kdijep.2015.37.4.1
- ISSN
- 2586-2995
- Abstract
- We examine the validity of popular exchange rate models such as the purchasing power parity (PPP) hypothesis and the monetary model for Korean won/US dollar exchange rate. Various specification tests demonstrate that Korean data are more favorable for both models based on time-varying cointegration coefficients as compared to those based on constant cointegration coefficients. When the abilities to predict future exchange rates between those models based on time-varying cointegration coefficients are compared, an in-sample analysis shows that the time-varying PPP (monetary model) has better predictive power over horizons shorter (longer) than one year. Results from an out-of-sample analysis indicate that the time-varying PPP outperforms models based on constant cointegration coefficients when predicting future exchange rate changes in the long run.
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Collections - College of Political Science & Economics > Department of Economics > 1. Journal Articles
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