Using a VECM to test exogeneity and forecastability in the PPP condition

Stefan C. Norrbin; Kevin Reffett; J. I. Yaohua

doi:10.1080/096031097333871

Using a VECM to test exogeneity and forecastability in the PPP condition

Stefan C. Norrbin, Kevin Reffett, J. I. Yaohua

Economics

Research output: Contribution to journal › Article › peer-review

5 Scopus citations

Abstract

The possibility is explored that purchasing power parity (PPP) can be useful in forecasting exchange rates and/or prices. The first step shows that the spot exchange rate is statistically exogenous in the PPP relationship. The next step investigates the forecastability of the variables in the PPP condition. The results show that a VECM can beat a random walk only in the case of the US price level.

Original language	English (US)
Pages (from-to)	87-95
Number of pages	9
Journal	Applied Financial Economics
Volume	7
Issue number	1
DOIs	https://doi.org/10.1080/096031097333871
State	Published - 1997

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1080/096031097333871

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abstract = "The possibility is explored that purchasing power parity (PPP) can be useful in forecasting exchange rates and/or prices. The first step shows that the spot exchange rate is statistically exogenous in the PPP relationship. The next step investigates the forecastability of the variables in the PPP condition. The results show that a VECM can beat a random walk only in the case of the US price level.",

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Using a VECM to test exogeneity and forecastability in the PPP condition

Abstract

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