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Do Divisia monetary aggregates help forecast exchange rates in a negative interest rate environment?

dc.creatorMolinas Sosa, Luis
dc.creatorBinner, Jane
dc.creatorTong, Meng
dc.date.accessioned2021-08-09T13:59:58Z
dc.date.available2021-08-09T13:59:58Z
dc.date.created2021-08-02
dc.date.issued2021-08-02
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dc.identifier.urihttps://repositorio.bcp.gov.py/handle/123456789/183
dc.description.abstractThis paper contributes to the literature as the first work of its kind to examine the role and importance of Divisia monetary aggregates and concomitant user cost price indices as superior monetary policy fore casting tools in a negative interest rate environment. We compare the performance of Divisia monetary aggregates with traditional simple-sum aggregates in several theoretical models and in a Bayesian VAR to forecast the exchange rates between the euro, the dollar and yuan renminbi at various horizons using quarterly data. We evaluate their performance against that of a random-walk using two criteria: Root Mean Square Error ratios and the Diebold-Mariano statistic. We find that, under a free-floating exchange regime, superior Divisia monetary aggregates outperform their simple sum counterparts and the bench mark random walk in negative interest rate environment and non-negative interest rate environments, consistently.
dc.format.extent22
dc.format.mimetypeapplication/pdf
dc.language.isoeng
dc.publisherBanco Central del Paraguay
dc.relation.ispartofDocumentos de Trabajo
dc.relation.ispartofseriesDocumento de Trabajo
dc.relation.isversionofDocumento de Trabajo; N° 25
dc.rights.urihttp://creativecommons.org/publicdomain/zero/1.0/
dc.titleDo Divisia monetary aggregates help forecast exchange rates in a negative interest rate environment?
dc.typeWorking Paper
dc.subject.jelC01
dc.subject.jelspaC01
dc.subject.keywordFORECASTING
dc.subject.keywordEXCHANGE RATES
dc.subject.keywordBAYESIAN VECTOR AUTOREGRESSION
dc.subject.keywordUNCOVERED INTEREST RATE
dc.subject.keywordSTICKY PRICE
dc.rights.accessRightsOpen Access
dc.type.spaDocumento de Trabajo
dc.type.hasversionPublished Version
dc.rights.ccCC0 1.0 Universal
dc.rights.spaAcceso abierto
dc.audience


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