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Forecasting EUR/PLN Exchange Rate: the Role of Purchasing Power Parity Hypothesis in ESTVEC Models

Author

Listed:
  • Adrian Marek Burda

    (Cracow University of Economics)

  • Blazej Mazur

    (Cracow University of Economics)

  • Mateusz Pawel Pipien

    (Cracow University of Economics)

Abstract

The purpose of this paper is to verify empirical consequences of imposing various forms of purchasing power parity (PPP) within a class of smooth transition vector error correction models (ESTVECM) for analysis of EUR/PLN exchange rage. Empirical importance of exponential smooth transition functions is confronted with the linear error-correction mechanism. A class of competing models for recursive samples are compared by the like-lihood ratio test, information criteria, and out of sample forecast accuracy measures.

Suggested Citation

  • Adrian Marek Burda & Blazej Mazur & Mateusz Pawel Pipien, 2017. "Forecasting EUR/PLN Exchange Rate: the Role of Purchasing Power Parity Hypothesis in ESTVEC Models," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 17, pages 97-114.
    • Handle: RePEc:cpn:umkdem:v:17:y:2017:p:97-114
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    References listed on IDEAS

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    More about this item

    Keywords

    PPP; ESTVECM; cointegration; exchange rate forecasting;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications

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