Multiple Regime Models and Exchange Rate Forecasting
CHUNCHIH CHEN 0
0National Taipei University
Available Online October 2006.
- https://doi.org/10.2991/jcis.2006.59How to use a DOI?
- Markov switching, exchange rate, forecast
- We extend the basic random walk Markov-Switching model in two ways and evaluate the out-of-sample forecasting performance on the Japanese yen during 1995-2004. First, we estimate both a two- and also a three-regime Markov switching models. Second, we add four exogenous variables as suggested in the monetary theory. According to the modified Diebold-Mariano forecast equivalence test, the result shows that our modified models, a three-regime random walk model and a two-regime monetary model, outperform a simple random walk for the yen. However, the interpretation of coefficients in the two-regime monetary model is unclear and the exchange-rate disconnect puzzle still remains a subject for further investigation.
- Open Access
- This is an open access article distributed under the CC BY-NC license.
Cite this article
TY - CONF AU - CHUNCHIH CHEN PY - 2006/10 DA - 2006/10 TI - Multiple Regime Models and Exchange Rate Forecasting BT - 9th Joint International Conference on Information Sciences (JCIS-06) PB - Atlantis Press SP - 245 EP - 248 SN - 1951-6851 UR - https://doi.org/10.2991/jcis.2006.59 DO - https://doi.org/10.2991/jcis.2006.59 ID - CHEN2006/10 ER -