No 133. Evaluation of Exchange Rate Forecasts for the Krona’s Nominal Effective Exchange Rate

by Henrik Degrér, Jan Hansen and Peter Sellin

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 Classification: F31; F41; F47.