|
| |
| Chun-Teck Lye, Tze-Haw Chan and Chee-Wooi Hooy |
| |
| ''Nonlinear prediction of Malaysian exchange rate with monetary fundamentals'' |
| ( 2011, Vol. 31 No.3 ) |
| |
| |
| This paper compares one-step-ahead out-of-sample predictions on Malaysian Ringgit-US Dollar exchange rate using the generalized regression neural network for a range of forecasting horizons from 1991M3 to 2008M8. We find that the monetary fundamentals are significant in explaining the dynamics of Malaysian exchange rate in a longer forecast horizon as the performance of monetary exchange rate models outperformed the random walk benchmark model. The results also revealed that Malaysian exchange rate market provides profitable short-term arbitrage opportunities with lagged observations, and the integration of autoregressive terms into the monetary exchange rate models enhanced the out-of-sample forecasting performance. |
| |
| |
| Keywords: Autoregressive, monetary model, neural network, random walk |
JEL: C5 - Econometric Modeling: General
F3 - International Finance: General |
| |
| Manuscript Received : Dec 28 2010 | | Manuscript Accepted : Jul 05 2011 |
|
