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 D., PARK, Donghyun, XIE, Taojun
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2015
Subjects:
emerging countries
exchange rate
inflation targeting
out-of-sample predictability
Taylor rule
Macroeconomics
Online Access:https://ink.library.smu.edu.sg/soe_research/1879
https://ink.library.smu.edu.sg/context/soe_research/article/2879/viewcontent/Predictability_of_Exchange_Rates_With_Taylor_Rule_av.pdf
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Institution: Singapore Management University
Language: English
Description
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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