TY - JOUR
AU - Engel,Charles
TI - Can the Markov Switching Model Forecast Exchange Rates?
JF - National Bureau of Economic Research Working Paper Series
VL - No. 4210
PY - 1992
Y2 - November 1992
DO - 10.3386/w4210
UR - http://www.nber.org/papers/w4210
L1 - http://www.nber.org/papers/w4210.pdf
N1 - Author contact info:
Charles Engel
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI 53706-1393
Tel: 608/262-3697
Fax: 608/262-2033
E-Mail: cengel@ssc.wisc.edu
AB - A Markov-switching model is fit for eighteen exchange rates at quarterly and monthly frequencies. This model fits well in-sample at the quarterly frequency for many exchange rates. By the mean-squared-error or mean-absolute-error criterion. the Markov model does not generate superior forecasts at a random walk or at the forward rate. There appears to be some evidence that the forecast of the Markov model are superior at predicting the direction of change of the exchange rate.
ER -