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Modeling the rand-dollar future spot rates: The Kalman Filter approach

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  • Lumengo Bonga-Bonga

Abstract

A number of studies have contended that it is challenging to explain exchange rate movement with macroeconomic fundamentals. A naive model such as a random walk forecasts exchange rate movements more reliably than existing structural models. This paper confirms that it is possible to improve the forecast of structural exchange rate models, by explicitly accounting […]

Suggested Citation

  • Lumengo Bonga-Bonga, 2008. "Modeling the rand-dollar future spot rates: The Kalman Filter approach," Working Papers 098, Economic Research Southern Africa.
    • Handle: RePEc:rza:wpaper:098
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    References listed on IDEAS

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    1. Graham Elliott & Allan Timmermann, 2016. "Economic Forecasting," Economics Books, Princeton University Press, edition 1, number 10740.
    2. Lewis, Karen K, 1989. "Changing Beliefs and Systematic Rational Forecast Errors with Evidence from Foreign Exchange," American Economic Review, American Economic Association, vol. 79(4), pages 621-636, September.
    3. Pretorius, Anmar & de Beer, Jesse, 2004. "Contagion in Africa: South Africa and a troubled neighbour, Zimbabwe," Economic Modelling, Elsevier, vol. 21(4), pages 703-717, July.
    4. Wolff, Christian C P, 1987. "Time-Varying Parameters and the Out-of-Sample Forecasting Performance of Structural Exchange Rate Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(1), pages 87-97, January.
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    Cited by:

    1. Mehmet Balcilar & Rangan Gupta & Clement Kyei & Mark E. Wohar, 2016. "Does Economic Policy Uncertainty Predict Exchange Rate Returns and Volatility? Evidence from a Nonparametric Causality-in-Quantiles Test," Open Economies Review, Springer, vol. 27(2), pages 229-250, April.
    2. Goodness C. Aye & Mehmet Balcilar & Adél Bosch & Rangan Gupta & Francois Stofberg, 2013. "The out-of-sample forecasting performance of non-linear models of real exchange rate behaviour: The case of the South African Rand," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 10(1), pages 121-148, April.
    3. Riane de Bruyn & Rangan Gupta & Renee van Eyden, 2013. "Forecasting The Rand-Dollar And Rand-Pound Exchange Rates Using Dynamic Model Averaging," Working Papers 201307, University of Pretoria, Department of Economics.
    4. Hyeyoen Kim & Doojin Ryu, 2013. "Forecasting Exchange Rate from Combination Taylor Rule Fundamental," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(S4), pages 81-92, September.
    5. Danglun Luo & Qianwei Ying, 2014. "Political Connections and Bank Lines of Credit," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(03), pages 5-21, May.
    6. Phungo, Muka & Bonga-Bonga, Lumengo, 2019. "An analysis of the unbiased forward rate hypothesis in developed and emerging economies," MPRA Paper 92222, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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