A portfolio balance approach to Euro-area money demand in a time-varying environment

Hall, Stephen G.; Hondroyiannis, George; Swamy, P. A. V. B.; Tavlas, George S.

doi:10.2139/ssrn.4163982

Cited by 21 publications

(1 citation statement)

References 20 publications

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“…It is opined that the performance of exchange rate predictive models would improve if models could account for evolution in the estimated parameters. An overview of the literature have shown that the TVP models are able to beat the random walk models (Abbate & Marcellino, 2014;Della Corte et al, 2009;Engel, Mark, & West, 2008;Hall, Hondroyiannis, Swamy, & Tavlas, 2008;Haskamp, 2017;Molodtsova & Papell, 2009). TVP has been modelled in different variants: the traditional Bayesian model (Byrne et al, 2016), Bayesian-VAR (Della Corte et al, 2009), dynamic Bayesian-VAR (Abbate & Marcellino, 2014).…”

Section: Portfolio Balance Theorymentioning

confidence: 99%

A new approach to exchange rate forecast: The role of global financial cycle and time‐varying parameters

Raheem

2020

Int. J Fin Econ

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The exchange rate disconnect puzzle argues that macroeconomic fundamentals are not able to accurately predict exchange rate. Recent studies have shown that the puzzle could be upturned if: (i) the dataset is structured in a panel form; (ii) the model is based on the portfolio balance theory (PBT); (iii) factor models are employed and (iv) time-varying parameter (TVP) regression is used. This study combines these strands of the literature. Essentially, the study conjectures that Global Financial Cycle (GFCy), drawing inspiration from PBT, has some predictive information content on exchange rate. Using dataset for 25 countries, we produced some mixed results. On the whole, the GFCy is able to produce lower forecast error, as compared to the benchmark model. However, its effectiveness is dependent upon the regression type (TVP vs Panel Fixed Effect); forecast horizons (short vs long); the sample period (early vs. late) and measures of GFCy. The results are robust to a number of checks.

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Section: Portfolio Balance Theorymentioning

confidence: 99%

A new approach to exchange rate forecast: The role of global financial cycle and time‐varying parameters

Raheem

2020

Int. J Fin Econ

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Does the Consideration of Nominal Wage Growth Imply a High Level of Inflation Inertia or Persistence Compared to Consumer Price Inflation?

Gumata

Ndou

2019

Accelerated Land Reform, Mining, Growth, Unemployment and Inequality in South Africa

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Revisiting the Role of the Money Demand Function: Does the Shortfall in Money Demand Impact the Inflation Responses to the Exchange Rate Depreciation Shocks?

Gumata

Ndou

2021

Achieving Price, Financial and Macro-Economic Stability in South Africa

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A portfolio balance approach to Euro-area money demand in a time-varying environment

Cited by 21 publications

References 20 publications

A new approach to exchange rate forecast: The role of global financial cycle and time‐varying parameters

A new approach to exchange rate forecast: The role of global financial cycle and time‐varying parameters

Does the Consideration of Nominal Wage Growth Imply a High Level of Inflation Inertia or Persistence Compared to Consumer Price Inflation?

Revisiting the Role of the Money Demand Function: Does the Shortfall in Money Demand Impact the Inflation Responses to the Exchange Rate Depreciation Shocks?

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