Template-Type: ReDIF-Paper 1.0
Author-Name:  Jaqueson K. Galimberti
Author-Name-First: Jaqueson K.
Author-Name-Last: Galimberti
Author-Name:  Marcelo L. Moura
Author-Name-First: Marcelo L.
Author-Name-Last: Moura
Title: Taylor Rules and Exchange Rate Predictability in Emerging Economies
Abstract:  This study links exchange rate determination and endogenous monetary policy represented by Taylor rules. We fill a gap in the literature by focusing on a group of fifteen emerging economies that adopted free-floating exchange rate and inflation targeting beginning in the mid-1990s. Due to the limited time-series span, a common obstacle to studying emerging economies, we employ panel data regressions to produce more efficient estimates. Following the recent literature, we use a robust set of out-of-sample statistics using bootstrapped and asymptotic distributions for the Diebold-Mariano, Clark and West and Theil’s U ratio. By evaluating different specifications for the Taylor rule exchange rate model based on their out-of-sample performance, we find that the forward-looking specification shows strong evidence of exchange rate predictability.
Length:  28 pages
Creation-Date:  2010
Order-URL: https://repositorio.insper.edu.br/handle/11224/5819
File-URL: https://repositorio.insper.edu.br/handle/11224/5819
File-Format: text/html
File-Function: Full text
Number: 103
Handle: RePEc:aap:wpaper:103