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Analysis of the CZK/USD exchange rate: a comparison of four major models

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  • Yu Hsing
  • Bruno S. Sergi

Abstract

This paper studies the behaviour of the CZK/USD exchange rate based on four major models. Using the Mean Absolute Percent Error (MAPE) as a criterion, the IS-MP model performs best, followed by the monetary model, the Purchasing Power Parity (PPP) model using the relative Producer Price Index (PPI), the PPP model using the relative Consumer Price Index (CPI), and the Uncovered Interest Parity (UIP) model. The widely used log–log form in the PPP model with the relative PPI can be rejected at the 5% level over the period 1993.Q1–2008.Q2. The insignificant coefficient or incorrect sign in each of the models may pose some challenges to policymakers when these models are applied.

Suggested Citation

  • Yu Hsing & Bruno S. Sergi, 2009. "Analysis of the CZK/USD exchange rate: a comparison of four major models," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 2(2), pages 91-102.
    • Handle: RePEc:ids:ijmefi:v:2:y:2009:i:2:p:91-102
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    Citations

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    Cited by:

    1. Andrés Herrera Aramburú & Gabriel Rodríguez, 2016. "Volatility of stock market and exchange rate returns in Peru: Long memory or short memory with level shifts?," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 9(1), pages 45-66.
    2. Manuel Joaquim Da Natividade Silva & Gutemberg Hespanha Brasil & Ricardo Ramalhete Moreira, 2016. "Dynamic relations of the inertia of monetary policy: application to the Brazilian case by a Kalman approach," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 9(1), pages 1-24.
    3. Onour, Ibrahim, 2020. "Modeling the impact of economic sanctions on a small open economy: A dynamic approach," MPRA Paper 116005, University Library of Munich, Germany.

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