What Decides the Exchange Rate? Theory – and Predictions of the Norwegian Krone against the Euro
DOI:
https://doi.org/10.14738/abr.66.4827Abstract
The paper analyses changes in the exchange rate of the Norwegian krone (NOK) as measured against the Euro, with the purpose of forecasting future exchange rates. The analysis is based on an error correction model. The model is given an autoregressive form. From the model is derived “out-of-sample forecast”. The predictions are compared with forecasts obtained from a Random Walk model. The empirical findings show that even though the economic model identifies several important explanatory variables, the Random Walk model performs better.
References
Aamodt, E. (2009). Valutakursmodellering av den norske valutakursen, en undersøkelse av informasjonsinnholdeti Nkr / Skr. Masteroppgave i samfunnsøkonomi, NHH, 2009.
Adrik, S (2016). Evaluating Benchmarks for Norwegian Exchange Rate Forecasting. Master’s Thesis 2016, Norwegian University of Life Sciences, School of Economics and Business.
Akram, Q. Farooq (2003). When does the oil price affect the Norwegian exchange rate? Working Paper 8/2000, Norges Bank 2000.
Akram, Q. Farooq (2002). PPP in the medium run despite oil shocks: The case of Norway. Working Paper 4/2002. Norges Bank 2002.
Bernhardsen, T. og Ø. Røisland (2000). Hvilke faktorer påvirker kronekursen? Penger og Kreditt 3/00, s. 187-194. Norges Bank 2000.
Bjørnland, H. C. and H. Hungnes (2003). Fundamental determinants of the long run real exchange rate: The case of Norway. Discussion Papers No. 326, August 2002. Statistisk Sentralbyrå, Forskningsavdelingen.
Bjørnland, H. C. og H. Hungnes (2006). The Importance of Interest Rates for Forecasting the Exchange Rate. Journal of Forecasting, 25, 209-221. Journal of forecasting 25 (3): 209 -221).
Vale, P. H. (2018). What Decides the Exchange Rate? Theory – and Predictions of the Norwegian Krone against the Euro. Archives of Business
Bjørnstad, R. og E. S. Jansen (2006). Renta bestemmer det meste. SSB Økonomiske Analyser 6/2006.
Bjørnstad, R. og E. S. Jansen (2007). The NOK/euro exchange rate after inflation targeting: The interest rate rules.
Discussion Papers No. 501, May 2007. Statistisk Sentralbyrå, (2007).
Blanchard, O. (2000). What do we know about Macroeconomics that Fisher and Wicksell did not? Quarterly Journal of Economics, 2000, v115(4, Nov), 1375-1409.
Dornbusch, R. (1976). Expectation and exchange rate dynamics, Journal of Policy economy 84 (6): 1161 - 1176.
Eitrheim, Ø., E. Frøyland and Ø. Røisland (1999). Can the price of currency options provide an indication of market perceptions of the uncertainty attracted to the krone exchange rate. Economic Bulletin, Vol. Lxx No. 1.
Flatner, Alexander (2009). Norske kroner ingen trygg havn. Aktuell kommentar Nr. 3/09. Norges Bank 2009.
Frankel, A. and A Jeffrey (1979). A Theory of Floating Exchange Rates Based on Real Interest Differential, American Economic Review, 64 (May 1979), pp. 610-622.
Frenkel, A. (1976). Monetary Approach to the Exchange Rate: Doctrinal Aspects and Empirical Evidence, The Scandinavian Journal of Economics Vol. 78, No. 2, Proceedings of a Conference on Flexible Exchange Rates and Stabilization Policy (Jun., 1976), pp. 200-224.
Gimmingsrud, A. (2012). Sammenhengen mellom valutakurs og prisen på råolje. Masteroppgave i samfunnsøkonomi, NMBU, 2012.
Kj, A. (2015). Hvilke faktorer bestemmer kronekursen – en empirisk analyse av kronekursen. Masteroppgave i samfunnsøkonom, NHH, 2015
Kloster, A., R. Lokshall and Ø. Røisland (2003). Hvor mye av bevegelsene i kronekursen kan forklares av rentedifferansen? Kapittel 6, Norges Banks skriftserie nr. 31. Hvilke faktorer kan forklare utviklingen i valutakursen? Øyvind Eitrheim og Kristin Guldbrandsen (red.). Oslo 2003.
Meese, Richard A. and Kenneth Rogoff (1983). Empirical exchange rate models of the seventies: Do they fit out of sample? Journal of International Economics 1983, s. 3-24.
Naug, B. E. (2004). Faktorer bak utviklingen i kronekursen – en empirisk analyse. Kapittel 7, Norges Banks skriftserie nr. 31. Hvilke faktorer kan forklare utviklingen i valutakursen? Øyvind Eitrheim og Kristin Guldbrandsen (red.). Oslo 2003. NA24 (2009).
Papadamou, S. and T. Markopoulos (1012). The monetary approach to the exchange rate determination for a “petroccurrency”. The case of Norwegian krone. International Advances in Economic Research 18(3): 299 -314. Springer. Rime, D. and E. Sojli (2006). Ordreanalyse av valutakurser, Penge og Kreditt 2 /2006, side 110-115, Norges Bank, 2006.
Reinton, H. and S. Ongene (1999). Out-of-sample forecasting performance of single equation monetary exchange rate models in Norwegian currency markets, Applied Financial Economics, 9, 545-550.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2018 Archives of Business Research
This work is licensed under a Creative Commons Attribution 4.0 International License.
