EXTERNAL IMBALANCES, VALUAT ION ADJUSTMENTS AND REAL EXCHANGE RATE: EVIDENCE OF PREDICTABILITY IN AN EMERGING ECONOMY

In this paper we provide evidence of exchange rate predictability for a selected emerging market economy (EME) at intermediate horizons, arguably, the most relevant for policy purposes. This is important because the existing literature on exchange rate predictability has mainly focused on developed...

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Autores principales:	PINCHEIRA,PABLO, SELAIVE,JORGE
Lenguaje:	English
Publicado:	ILADES. Universidad Alberto Hurtado. 2011
Materias:	Real exchange rate net foreign assets valuation adjustments forecasting evaluation
Acceso en línea:	http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-88702011000100005
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spelling	oai:scielo:S0718-887020110001000052011-07-22EXTERNAL IMBALANCES, VALUAT ION ADJUSTMENTS AND REAL EXCHANGE RATE: EVIDENCE OF PREDICTABILITY IN AN EMERGING ECONOMYPINCHEIRA,PABLOSELAIVE,JORGE Real exchange rate net foreign assets valuation adjustments forecasting evaluation In this paper we provide evidence of exchange rate predictability for a selected emerging market economy (EME) at intermediate horizons, arguably, the most relevant for policy purposes. This is important because the existing literature on exchange rate predictability has mainly focused on developed economies, leaving relatively unexplored the question for EME. By making use of a unique quarterly database of external assets and liabilities for Chile, we show that a measure of external imbalances is able to predict the real exchange rate over horizons of up to two years. Robust out-of-sample evidence on predictability reflects the fact that the external balance's importance to the exchange rate has risen in recent years and/or the precision of parameter estimates rises as sample size grows larger. When we break down our measure for external imbalances into its three component ratios (exports to imports, exports to assets, and assets to liabilities), we find that predictability is mainly driven by the last two. Our results suggest that researchers and policymakers should pay attention to external imbalances to understand the future dynamics of the real exchange rate.info:eu-repo/semantics/openAccessILADES. Universidad Alberto Hurtado.Revista de análisis económico v.26 n.1 20112011-06-01text/htmlhttp://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-88702011000100005en10.4067/S0718-88702011000100005
institution	Scielo Chile
collection	Scielo Chile
language	English
topic	Real exchange rate net foreign assets valuation adjustments forecasting evaluation
spellingShingle	Real exchange rate net foreign assets valuation adjustments forecasting evaluation PINCHEIRA,PABLO SELAIVE,JORGE EXTERNAL IMBALANCES, VALUAT ION ADJUSTMENTS AND REAL EXCHANGE RATE: EVIDENCE OF PREDICTABILITY IN AN EMERGING ECONOMY
description	In this paper we provide evidence of exchange rate predictability for a selected emerging market economy (EME) at intermediate horizons, arguably, the most relevant for policy purposes. This is important because the existing literature on exchange rate predictability has mainly focused on developed economies, leaving relatively unexplored the question for EME. By making use of a unique quarterly database of external assets and liabilities for Chile, we show that a measure of external imbalances is able to predict the real exchange rate over horizons of up to two years. Robust out-of-sample evidence on predictability reflects the fact that the external balance's importance to the exchange rate has risen in recent years and/or the precision of parameter estimates rises as sample size grows larger. When we break down our measure for external imbalances into its three component ratios (exports to imports, exports to assets, and assets to liabilities), we find that predictability is mainly driven by the last two. Our results suggest that researchers and policymakers should pay attention to external imbalances to understand the future dynamics of the real exchange rate.
author	PINCHEIRA,PABLO SELAIVE,JORGE
author_facet	PINCHEIRA,PABLO SELAIVE,JORGE
author_sort	PINCHEIRA,PABLO
title	EXTERNAL IMBALANCES, VALUAT ION ADJUSTMENTS AND REAL EXCHANGE RATE: EVIDENCE OF PREDICTABILITY IN AN EMERGING ECONOMY
title_short	EXTERNAL IMBALANCES, VALUAT ION ADJUSTMENTS AND REAL EXCHANGE RATE: EVIDENCE OF PREDICTABILITY IN AN EMERGING ECONOMY
title_full	EXTERNAL IMBALANCES, VALUAT ION ADJUSTMENTS AND REAL EXCHANGE RATE: EVIDENCE OF PREDICTABILITY IN AN EMERGING ECONOMY
title_fullStr	EXTERNAL IMBALANCES, VALUAT ION ADJUSTMENTS AND REAL EXCHANGE RATE: EVIDENCE OF PREDICTABILITY IN AN EMERGING ECONOMY
title_full_unstemmed	EXTERNAL IMBALANCES, VALUAT ION ADJUSTMENTS AND REAL EXCHANGE RATE: EVIDENCE OF PREDICTABILITY IN AN EMERGING ECONOMY
title_sort	external imbalances, valuat ion adjustments and real exchange rate: evidence of predictability in an emerging economy
publisher	ILADES. Universidad Alberto Hurtado.
publishDate	2011
url	http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-88702011000100005
work_keys_str_mv	AT pincheirapablo externalimbalancesvaluationadjustmentsandrealexchangerateevidenceofpredictabilityinanemergingeconomy AT selaivejorge externalimbalancesvaluationadjustmentsandrealexchangerateevidenceofpredictabilityinanemergingeconomy
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EXTERNAL IMBALANCES, VALUAT ION ADJUSTMENTS AND REAL EXCHANGE RATE: EVIDENCE OF PREDICTABILITY IN AN EMERGING ECONOMY

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