Westerlund, Joakim and Basher, Syed A. (2006): Can Panel Data Really Improve the Predictability of the Monetary Exchange Rate Model?
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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.
|Item Type:||MPRA Paper|
|Original Title:||Can Panel Data Really Improve the Predictability of the Monetary Exchange Rate Model?|
|Keywords:||Monetary Exchange Rate Model; Forecasting; Panel Data; Pooling; Bootstrap|
|Subjects:||F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F47 - Forecasting and Simulation: Models and Applications
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C32 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C33 - Models with Panel Data; Longitudinal Data; Spatial Time Series
|Depositing User:||Syed Basher|
|Date Deposited:||22. Dec 2006|
|Last Modified:||25. Feb 2013 07:50|
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