Realignment Expectations, Forward Rate Bias, and Sterilized Intervention in an Adjustable Peg Exchange Rate Model with Policy Optimization

Abstract This paper presents a partial equilibrium model that integrates interest rate arbitrage with the balance-of-payments constraint to determine the real exchange rate. The sequential logic is the following: (i) carry-trade determines the term premium, with the spot rate showing greater volatility than the forward rate, (ii) uncovered interest rate parity determines the spot rate based on the real exchange rate consistent with a financial constraint, defined as a stable ratio of foreign reserves to foreign debt; and (iii) the trade balance consistent with the financial constraint determines the long-run real exchange rate for a given ratio of domestic to foreign income.

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Cointegration Tests Of The Monetary Exchange Rate Model: The Canadian—U.S. Dollar, 1970 – 1994

International Economic Journal ◽

10.1080/10168739600000014 ◽

1996 ◽

Vol 10 (4) ◽

pp. 83-97 ◽

Cited By ~ 1

Author(s):

Panayiotis F Diamandis ◽

Dimitris A. Georgoutsos ◽

Georgios.P Kouretas

Keyword(s):

Exchange Rate ◽

Rate Model ◽

Cointegration Tests

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A Wind-Driven Gas Exchange Rate Model

Environmental Engineering Science ◽

10.1089/ees.2018.0139 ◽

2019 ◽

Vol 36 (3) ◽

pp. 344-349

Author(s):

Zhiyong Duan

Keyword(s):

Exchange Rate ◽

Gas Exchange ◽

Rate Model ◽

Gas Exchange Rate

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A Multidude of Econometric Tests: Forecasting the Dutsch Guilder

International Journal of Economics and Finance ◽

10.5539/ijef.v9n9p94 ◽

2017 ◽

Vol 9 (9) ◽

pp. 94

Author(s):

Augustine C. Arize ◽

Ioannis N. Kallianiotis ◽

Ebere Eme Kalu ◽

John Malindretos ◽

Moschos Scoullis

Keyword(s):

Exchange Rate ◽

Error Correction ◽

Forecast Error ◽

Predictive Performance ◽

Mean Square ◽

Rate Model ◽

Long Run ◽

Exchange Rate Models ◽

Econometric Tests ◽

Nonparametric Techniques

This paper studies a diversity of exchange rate models, applies both parametric and nonparametric techniques to them, and examines said models’ collective predictive performance. We shall choose the forecasting predictor with the smallest root mean square forecast error (RMSE); the empirical evidence for a better type of exchange rate model is in equation (34), although none of our evidence gives an optimal forecast. At the end, these models’ error correction versions will be fit so that plausible long-run elasticities can be imposed on each model’s fundamental variables.

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