Can panel data really improve the predictability of the monetary exchange rate model?

Westerlund, Joakim and Basher, Syed A. 2007, Can panel data really improve the predictability of the monetary exchange rate model?, Journal of forecasting, vol. 26, no. 5, pp. 365-383, doi: 10.1002/for.1034.

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Title Can panel data really improve the predictability of the monetary exchange rate model?
Author(s) Westerlund, JoakimORCID iD for Westerlund, Joakim
Basher, Syed A.
Journal name Journal of forecasting
Volume number 26
Issue number 5
Start page 365
End page 383
Total pages 19
Publisher Wiley
Place of publication London, Eng.
Publication date 2007-08
ISSN 0277-6693
Keyword(s) Bootstrap
Monetary exchange rate model
Panel data
Social Sciences
Business & Economics
Summary A common explanation for the inability of the monetary model to beat the random walk in forecasting future exchange rates is that conventional time series tests may have low power, and that panel data should generate more powerful tests. This paper provides an extensive evaluation of this power argument to the use of panel data in the forecasting context. In particular, by using simulations it is shown that although pooling of the individual prediction tests can lead to substantial power gains, pooling only the parameters of the forecasting equation, as has been suggested in the previous literature, does not seem to generate more powerful tests. The simulation results are illustrated through an empirical application. Copyright © 2007 John Wiley & Sons, Ltd.
Language eng
DOI 10.1002/for.1034
Field of Research 150202 Financial Econometrics
Socio Economic Objective 919999 Economic Framework not elsewhere classified
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2007, John Wiley & Sons
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Document type: Journal Article
Collections: Faculty of Business and Law
Deakin Business School
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