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A Vector Autoregressive Forecasting Model of The US$/$A Exchange Rate

Author

Listed:
  • Lindsay I. Hogan

    (Bureau of Agricultural Economics, Canberra.)

  • Peter J. Urban

    (Bureau of Agricultural Economics, Canberra.)

  • V. V. Anh

    (Queensland Institute of Technology, Brisbane.)

Abstract

A forecasting model of the US$/$A exchange rate is derived through the application of vector autoregression (VAR) techniques. The major theoretical models of exchange rate determination are reviewed to identify relevant variables to include in the VAR model. For the within-sample period of September 1974 to May 1983, the VAR forecasts are found to be clearly superior to the naive no-charge extrapolated forecasts. However, the position is reversed when the out-of-sample forecasts are examined.

Suggested Citation

  • Lindsay I. Hogan & Peter J. Urban & V. V. Anh, 1985. "A Vector Autoregressive Forecasting Model of The US$/$A Exchange Rate," Australian Journal of Management, Australian School of Business, vol. 10(2), pages 47-65, December.
    • Handle: RePEc:sae:ausman:v:10:y:1985:i:2:p:47-65
    DOI: 10.1177/031289628501000203
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    References listed on IDEAS

    as
    1. McKinnon, Ronald I, 1982. "Currency Substitution and Instability in the World Dollar Standard," American Economic Review, American Economic Association, vol. 72(3), pages 320-333, June.
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    3. Frankel, Jeffrey A, 1979. "On the Mark: A Theory of Floating Exchange Rates Based on Real Interest Differentials," American Economic Review, American Economic Association, vol. 69(4), pages 610-622, September.
    4. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
    5. McKinnon, Ronald I, 1981. "The Exchange Rate and Macroeconomic Policy: Changing Postwar Perceptions," Journal of Economic Literature, American Economic Association, vol. 19(2), pages 531-557, June.
    6. Cornell, Bradford, 1983. "The Money Supply Announcements Puzzle: Review and Interpretation," American Economic Review, American Economic Association, vol. 73(4), pages 644-657, September.
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