Abstract:This study aims to incorporate the effects of recently used alternative monetary policies, such as quantitative easing into standard Taylor rule exchange rate models. Using out-of-sample forecasting, we determine whether including long-term government bond yields and shadow interest rates improves on these model's performance. Using data from the Eurozone, Japan, UK and USA, we perform out of sample forecasts using a rolling window, the results suggest that the model with government bond returns performs best … Show more
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