Private information and a macro model of exchange rates
evidence from a novel data set
by Menzie David Chinn
"We propose an exchange rate model which is a hybrid of the conventional specification with monetary fundamentals and the Evans-Lyons microstructure approach. It argues that the failure of the monetary model is principally due to private preference shocks which render the demand for money unstable. These shocks to liquidity preference are revealed through order flow. We estimate a model augmented with order flow variables, using a unique data set: almost 100 monthly observations on inter-dealer order flow on dollar/euro and dollar/yen. The augmented macroeconomic, or "hybrid", model exhibits out of sample forecasting improvement over the basic macroeconomic and random walk specifications"--National Bureau of Economic Research web site.
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Private information and a macro model of exchange rates: evidence from a novel data set
2008, National Bureau of Economic Research
Electronic resource
in English
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Title from PDF file as viewed on 7/23/2008.
Includes bibliographical references.
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.
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