Exchange rates and fundamentals: Evidence from long-horizon regression tests

Shiu Sheng Chen, Yu His Chou

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

This article considers the long-run relationship between nominal exchange rates and fundamentals from a different perspective. We apply a long-horizon regression approach proposed by Fisher and Seater (1993) and find evidence supporting the explanatory power of exchange rate models. In particular, the Taylor-rule model outperforms other conventional models. We then use the inverse power function (IPF) proposed by Andrews (1989) to investigate the power of the Fisher-Seater test. The IPF analysis provides additional evidence supporting exchange rate models.

Original languageEnglish
Pages (from-to)63-88
Number of pages26
JournalOxford Bulletin of Economics and Statistics
Volume72
Issue number1
DOIs
Publication statusPublished - 2010 Feb 1
Externally publishedYes

ASJC Scopus subject areas

  • Statistics and Probability
  • Social Sciences (miscellaneous)
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

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