Structural breaks in Taylor rule based exchange rate models - Evidence from threshold time varying parameter models

Florian Huber

doi:10.1016/j.econlet.2016.11.008

Structural breaks in Taylor rule based exchange rate models - Evidence from threshold time varying parameter models

Florian Huber

Department of Economics (Crespo Cuaresma)

Publication: Scientific journal › Journal article › peer-review

Abstract

In this note we develop a Taylor rule based empirical exchange rate model for eleven major currencies that endogenously determines the number of structural breaks in the coefficients. Using a constant parameter specification and a standard time-varying parameter model as competitors reveals that our flexible modeling framework yields more precise density forecasts for all major currencies under scrutiny over the last 24 years.

Original language	English
Pages (from-to)	48 - 52
Journal	Economics Letters
Volume	150
Issue number	1
DOIs	https://doi.org/10.1016/j.econlet.2016.11.008
Publication status	Published - 2017

Austrian Classification of Fields of Science and Technology (ÖFOS)

101026 Time series analysis
502025 Econometrics
502018 Macroeconomics

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Cite this

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abstract = "In this note we develop a Taylor rule based empirical exchange rate model for eleven major currencies that endogenously determines the number of structural breaks in the coefficients. Using a constant parameter specification and a standard time-varying parameter model as competitors reveals that our flexible modeling framework yields more precise density forecasts for all major currencies under scrutiny over the last 24 years.",

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AB - In this note we develop a Taylor rule based empirical exchange rate model for eleven major currencies that endogenously determines the number of structural breaks in the coefficients. Using a constant parameter specification and a standard time-varying parameter model as competitors reveals that our flexible modeling framework yields more precise density forecasts for all major currencies under scrutiny over the last 24 years.

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DO - 10.1016/j.econlet.2016.11.008

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