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Evaluating the Importance of PPP Error Correction in Exchange Rate Forecasting
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Statistics.
2016 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

This paper evaluates the effects of error correction based on purchasing power parity in exchange rate forecasting models. This is done by evaluating the performance of VAR, VEC and baseline univariate models using British and Dutch exchange rates towards Sweden for a wide range of forecasting horizons with a rolling window approach. Results are largely inconclusive, with no statistically significant difference in performance between the two main models of interest although mean performance largely mirror previous research, with error correction models tending towards relatively better performance for longer horizons, although these results seem sensitive to structural change and shocks to the underlying processes.

Place, publisher, year, edition, pages
2016.
National Category
Social Sciences
Identifiers
URN: urn:nbn:se:uu:diva-296142OAI: oai:DiVA.org:uu-296142DiVA: diva2:936368
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Available from: 2016-06-27 Created: 2016-06-13 Last updated: 2016-06-27Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
  • ieee
  • modern-language-association
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Language
  • de-DE
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More languages
Output format
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