Predictability of exchange rates with taylor rule fundamentals : evidence from inflation-targeting emerging countries

Predictability of exchange rates with taylor rule fundamentals : evidence from inflation-targeting emerging countries

We investigate the out-of-sample predictability of U.S. dollar exchange rates with Taylor rule fundamentals in thirteen emerging countries with inflation-targeting monetary policy regimes. We find some evidence of out-of-sample exchange rate predictability for Brazil, Czech Republic, Hungary, Philip...

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Bibliographic Details
Main Authors: Alba, Joseph Dennis, Park, Donghyun, Xie, Taojun
Other Authors: School of Social Sciences
Format: Article
Language:English
Published: 2021
Subjects:
Social sciences::Economic theory
Emerging Countries
Exchange Rate
Online Access:https://hdl.handle.net/10356/147546
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Institution: Nanyang Technological University
Language: English
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Summary:We investigate the out-of-sample predictability of U.S. dollar exchange rates with Taylor rule fundamentals in thirteen emerging countries with inflation-targeting monetary policy regimes. We find some evidence of out-of-sample exchange rate predictability for Brazil, Czech Republic, Hungary, Philippines, Thailand, and South Africa. Plots of the coefficients of U.S. inflation and Philippine inflation predict the direction of the U.S. dollar-Philippine peso exchange rates to be opposite to that predicted by the Taylor principle.

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