Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)
Structural breaks in Taylor rule based exchange rate models - Evidence from threshold time varying parameter models
Abstract: In this note we develop a Taylor rule based empirical
exchange rate model for eleven major currencies that endogenously
determines the number of structural breaks in the coefficients. Using a
constant parameter specification and a standard time-varying parametermodel
as competitors reveals that our flexible modeling framework yields more
precise density forecasts for all major currencies under scrutiny over the
last 24 years.
Keywords: Stochastic volatility, mixture innovation models, time-varying parameters; (follow links to similar papers)
JEL-Codes: E52,; F31,; F42; (follow links to similar papers)
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