Using ARIMA Forecasts to Explore the Efficiency of the Forward Reichsmark Market : Austria-Hungary, 1876-1914

Abstract : We explore the efficiency of the forward reichsmark market in Vienna between 1876 and 1914. We estimate ARIMA models of the spot exchange rate in order to forecast the one-month-ahead spot rate. In turn we compare these forecasts to the contemporaneous forward rate, i.e., the market's forecast of the future spot rate. We find that shortly after the introduction of a "shadow" gold standard in the mid-1890s the forward rate became a considerably better predictor of the future spot rate than during the prior flexible exchange rate regime. Between 1907 and 1914 forecast errors were between a half and one-fourth of their pre-1896 level. This implies that the Austro-Hungarian Bank's policy of defending the gold value of the currency was successful in improving the efficiency of the foreign exchange market.
Type de document :
Pré-publication, Document de travail
2003
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https://hal-sciencespo.archives-ouvertes.fr/hal-01065037
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Dernière modification le : mardi 11 octobre 2016 - 13:29:12
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cfi-wp-mf-uom200204.pdf
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  • HAL Id : hal-01065037, version 1
  • SCIENCESPO : 2441/326

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John Komlos, Marc Flandreau. Using ARIMA Forecasts to Explore the Efficiency of the Forward Reichsmark Market : Austria-Hungary, 1876-1914. 2003. 〈hal-01065037〉

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