Out-of-Sample Performance of the Macroeconomic Balance Approach to the Real Exchange Rate in Sub-Saharan Africa

2014 ◽  
Vol 23 (3) ◽  
pp. 346-360 ◽  
Author(s):  
V. Cerra ◽  
S. C. Saxena
1996 ◽  
Vol 40 (1) ◽  
pp. 92-103
Author(s):  
Jonathan Ikoba ◽  
Akorlie A. Nyatepe-Coo ◽  
Oluwole Owoye

This paper examines the relative contributions of domestic and external factors to real exchange rate changes in six sub-Sahara African countries during the period 1960–91. A vector autoregression (VAR) model is used to analyze the interrelationships between the current account, the budget balance and the real exchange rate. The results suggest that external factors such as the terms of trade and foreign income were as important as domestic policy mistakes in causing real exchange rate misalignment in sub-Saharan Africa.


2015 ◽  
Vol 50 (5) ◽  
pp. 1037-1056 ◽  
Author(s):  
Pedro Barroso ◽  
Pedro Santa-Clara

AbstractWe test the relevance of technical and fundamental variables in forming currency portfolios. Carry, momentum, and value reversal all contribute to portfolio performance, whereas the real exchange rate and the current account do not. The resulting optimal portfolio produces out-of-sample returns that are not explained by risk and are valuable to diversified investors holding stocks and bonds. Exposure to currencies increases the Sharpe ratio of diversified portfolios by 0.5 on average, while reducing crash risk. We argue that besides risk, currency returns reflect the scarcity of speculative capital.


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