Template-Type: ReDIF-Paper 1.0
Author-Name:  Wilson Rafael de Oliveira Felício
Author-Name-First: Wilson Rafael de Oliveira
Author-Name-Last: Felício
Author-Name:  José Luiz Rossi Júnior
Author-Name-First: José Luiz
Author-Name-Last: Rossi Júnior
Title: The Usefulness of factor models in forecasting the exchange rate: results from the Brazilian case
Abstract:  This paper studies the usefulness of factors embedded on the common movements of exchange rates in forecasting the exchange rate Real/Dollar. The results show that considering the entire period of the sample from January 1999 to August 2011, no one model containing the factors is able to beat a random walk model. However, when the period directly following the adoption of the floating exchange rate regime is discarded, there is evidence that several models containing these factors beat the random walk. Lastly, the paper shows that the addition of factors improves the predictive power of the models comprising only macroeconomic variables commonly used in the literature to forecast the exchange rate.
Length:  23 pages
Creation-Date:  2012
Order-URL: https://repositorio.insper.edu.br/handle/11224/5912
File-URL: https://repositorio.insper.edu.br/handle/11224/5912
File-Format: text/html
File-Function: Full text
Number: 159
Handle: RePEc:aap:wpaper:159