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The out-of-sample forecasts of nonlinear long-memory models of the real exchange rate

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  • Sang-Kuck Chung

    (Department of Economics and International Trade, INJE University, Korea)

Abstract

We consider a new time series model that can describe long memory and nonlinearity simultaneously and can be used to assess an extensive evaluation of the out-of-sample forecasting performance of the nonlinear long-memory model. Upon fitting it to the real exchange rate, we find that a parsimonious version of the model captures the salient features of the data rather well. We then use this nonlinear long-memory model to forecast dynamically out-of-sample over the sample period for OECD countries. Overall, we find clear evidence that favours the nonlinear long-memory model over any other estimated models. Copyright © 2006 John Wiley & Sons, Ltd.

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  • Sang-Kuck Chung, 2006. "The out-of-sample forecasts of nonlinear long-memory models of the real exchange rate," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(4), pages 355-370.
    • Handle: RePEc:ijf:ijfiec:v:11:y:2006:i:4:p:355-370
    DOI: 10.1002/ijfe.304
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