Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 133: Evaluation of exchange rate forecasts for the krona’s nominal effective exchange rate

Henrik Degrér (), Jan Hansen () and Peter Sellin ()
Additional contact information
Henrik Degrér: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Jan Hansen: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Peter Sellin: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

Abstract: In this paper we evaluate the out of sample forecasting performance of a large number of models belonging to a popular class of exchange rate models. Forecasts of the Swedish nominal effective exchange rate for the period 1980-2000 are performed using both single equation estimation and VAR approaches. The forecast horizons used were from 1 to 12 quarters. None of the models evaluated could convincingly outperform a random walk alternative.

Keywords: Exchange rates; monetary approach; forecasting

JEL-codes: F31; F41; F47

51 pages, December 1, 2001

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