Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/259828 
Year of Publication: 
2000
Series/Report no.: 
Working Paper No. 1999:4
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
Abstract: 
We suggest that the real exchange rate between the major currencies in the post-Bretton Woods period can be described by a stationary, two state Markov switching AR(1) model. Based on the forecast performance, both in-sample and out-of-sample, we find that this model out-performs two competing models where the real exchange rate is non-stationary. We also find that the existence of different regimes, as in the Markov switching model, is consistent with the common finding of unit roots in the real exchange rate.
Subjects: 
Real exchange rates
Markov switching autoregressive models
forecasts
simulation
JEL: 
C22
C53
F31
Document Type: 
Working Paper

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