Skip to main content Skip to main navigation menu Skip to site footer
  • Register
  • Login
  • Menu
  • Home
  • Current
  • Archives
  • About
    • About the Journal
    • Submissions
    • Editorial Team
    • Privacy Statement
    • Contact
  • Register
  • Login

Dynamic Econometric Models

Forecasting EUR/PLN Exchange Rate: the Role of Purchasing Power Parity Hypothesis in ESTVEC Models
  • Home
  • /
  • Forecasting EUR/PLN Exchange Rate: the Role of Purchasing Power Parity Hypothesis in ESTVEC Models
  1. Home /
  2. Archives /
  3. Vol. 17 (2017) /
  4. Articles

Forecasting EUR/PLN Exchange Rate: the Role of Purchasing Power Parity Hypothesis in ESTVEC Models

Authors

  • Adrian Marek Burda Cracow University of Economics
  • Błażej Mazur Cracow University of Economics http://orcid.org/0000-0001-5096-5175
  • Mateusz Paweł Pipień Cracow University of Economics

DOI:

https://doi.org/10.12775/DEM.2017.006

Keywords

PPP, ESTVECM, cointegration, exchange rate forecasting

Abstract

The purpose of this paper is to verify strong-form purchasing power parity (PPP) of EUR/PLN within a class of smooth transition vector error correction models (ESTVECM). Empirical importance of exponential smooth transition functions is confronted with the linear error-correction mechanism. A class of competing models for recursive samples are compared by the likelihood ratio test, information criteria, and out of sample forecast accuracy measures.

Author Biographies

Adrian Marek Burda, Cracow University of Economics

Ph.D student

Błażej Mazur, Cracow University of Economics

Department of Econometrics and Operations Research, Cracow University of Economics, Rakowicka 27, 31-510 Kraków, 

Assistant Professor

Mateusz Paweł Pipień, Cracow University of Economics

Department of Econometrics and Operations Research, Cracow University of Economics, Rakowicka 27, 31-510 Kraków,

Associate Professor, Head of Division of Financial Econometrics and Macroeconometrics in the Department of Econometrics and Operational Research, Cracow University of Economics

References

Arize, A. C., Malindretos, J., & Ghosh, D. (2015), Purchasing power parity-symmetry and proportionality: Evidence from 116 countries, International Review of Economics & Finance, 37, 69–85, DOI: http://doi.org/10.1016/j.iref.2014.11.014

Arize, A. C., Malindretos, J., & Nippani, S. (2004), Variations in exchange rates and infla-tion in 82 countries: an empirical investigation, The North American Journal of Economics and Finance, 15(2), 227–247, DOI: http://doi.org/10.1016/j.najef.2003.12.002

Bęza-Bojanowska, J., MacDonald M. R. (2009), The behavioral zloty/euro equilibrium exchange rate, NBP Working Papers 55, http://www.nbp.pl/publikacje/materialyistudia/55en.pdf.

Błaszkiewicz, M., Kowalski, P., Rawdanowicz, Ł., Woźniak P. (2004), Harrod-Balassa-Samuelson Effect in Selected Countries of Central and Eastern Europe, CASE Re-port 57, Warsaw.

Cassel, G. (1918),Abnormal deviations of international exchanges, Economic Journal, 28, 413–415, DOI: http://dx.doi.org/10.2307/2223329

Cassel, G.(1921), The Worlds Monetary Problem, London, Constable and Co.

Cassel, G.(1922), Money and foreign exchange after 1914, New York, Constable and Co.

Ca’ Zorzi, M., Kolasa, M., & Rubaszek, M. (2017), Exchange rate forecasting with DSGE models, Journal of International Economics, 107, 127–146, DOI: https://doi.org/10.1016/j.jinteco.2017.03.011

Chang, T., Tang, D.-P., Liu, W.-C., & Lee, C.-H. (2010), Purchasing power parity for 15 COMESA and SADC countries: evidence based on panel SURADF tests, Applied Economics Letters, 17(17), 1721–1727, DOI: http://doi.org/10.1080/13504850903153775

Diebold, F. X., & Mariano, R. S. (1995), Comparing Predictive Accuracy, Journal of Busi-ness & Economic Statistics, 13(3), 253, DOI: http://doi.org/10.2307/1392185

Dornbusch, R. (1976), Expectations and Exchange Rate Dynamics, Journal of Political Economy, 84(6), 1161–1176.

Dumas, B. (1992), Dynamic Equilibrium and the Real Exchange Rate in a Spatially Sepa-rated World, Review of Financial Studies, 5(2), 153–180, DOI: http://doi.org/10.1093/rfs/5.2.153

Emirmahmutoglu, F., & Omay, T. (2014), Reexamining the PPP hypothesis: A nonlinear asymmetric heterogeneous panel unit root test, Economic Modelling, 40, 184–190. DOI: http://doi.org/10.1016/j.econmod.2014.03.028

Gefang, D. (2008), Investigating nonlinear purchasing power parity during the post-Bretton Woods era – A Bayesian exponential smooth transition VECM approach. Advances in Econometrics, 471–500, DOI: http://doi.org/10.1016/s0731-9053(08)23014-8

Harvey, D., Leybourne, S., & Newbold, P. (1997), Testing the equality of prediction mean squared errors, International Journal of Forecasting, 13(2), 281–291, DOI: http://doi.org/10.1016/s0169-2070(96)00719-4

Johnson, H. G. (1976). The monetary approach to balance-of-payments theory. In J. A. Frenkel, & H. G. Johnson (Eds.), The Monetary Approach to the Balance of Pay-ments (pp. 147–167). London: George Allen & Unwin Ltd.

Kapetanios, G., Shin, Y., Snell, A. (2003), Testing for a unit root in the nonlinear STAR framework, Journal of Econometrics, vol. 112, 359-373, DOI: http://dx.doi.org/10.1016/S0304-4076(02)00202-6

Kelm, R. (2010), Model behawioralnego kursu równowagi złotego do euro w okresie styczeń 1996 – czerwiec 2009 r., Bank i Kredyt, nr 41, 21–42.

Kelm, R. (2013), Kurs złoty/euro: teoria i empiria, Wyd. UŁ, Łódź

Kelm, R., J. Bęza-Bojanowska (2005), Polityka monetarna i fiskalna a odchylenia realnego kursu złoty/euro od kursu równowagi 1995:01–2004:06, Bank i Kredyt, nr 36, 4–19.

Kębłowski, P., Welfe, A. (2012), The Risk-Driven Approach to Exchange Rate Modelling, Economic Modelling, vol. 29, 1473–1482, DOI: http://dx.doi.org/10.1016/j.econmod.2012.02.002

Kokoszczynski, R. (2001), From Fixed to Floating: Other Country Experiences: The Case of Poland, Paper to be presented at the IMF seminar Exchange Rate Regimes: Hard Peg or Free Floating?, Washington, DC, March 19-20, 2001.

Lothian, J. R., & Taylor, M. P. (1996), Real Exchange Rate Behavior: The Recent Float from the Perspective of the Past Two Centuries, Journal of Political Economy, 104(3), 488–509, DOI: http://doi.org/10.1086/262031

Lucas, R. E. (1982), Interest rates and currency prices in a two-country world, Journal of Monetary Economics, 10(3), 335–359, DOI: http://doi.org/10.4159/harvard.9780674067851.c6

Månsson, K., Sjölander, P. (2014), Testing for nonlinear panel unit roots under cross-sectional dependency — With an application to the PPP hypothesis, Economic Modelling, 38, 121–132, DOI: https://doi.org/10.1016/j.econmod.2013.12.013

McMillan, D. (2009), The Confusing Time-Series Behaviour of the Real Exchange Rates: Are Asymmetries Important?, Journal of International Financial Markets, Institu-tions andMoney, vol. 19, 692–711, DOI: http://dx.doi.org/10.1016/j.intfin.2008.12.002

Nakagawa, H. (2010), Investigating Nonlinearities in Real Exchange Rate Adjustment: Threshold Cointegration and the Dynamics of Exchange Rates and Relative Prices, Journal of International Money and Finance, vol. 29, 770–790, DOI: http://dx.doi.org/10.1016/j.jimonfin.2010.03.002

O’Connell, P., Wei, S. J. (1997), The Bigger They Are, the Harder They Fall: How Price Differences across U.S. Cities are Arbitraged, NBER Working Paper, no. 6089.

Officer, L.,H. (1982), Purchasing ower parity and exchange rates: Theory, evidence and relevance Greenwich, CT: JAI Press.

Papell, D. H. (1997), Searching for stationarity: Purchasing power parity under the current float, Journal of International Economics, 43(3-4), 313–332, DOI: http://doi.org/10.1016/s0022-1996(96)01467-5

Parikh, A., Wakerly, E. (2000), Real Exchange Rates and Unit Root Tests, Weltwirtschaft-liches Archiv, Bd. 136, 478-490.

Rogoff K. (1996), The Purchasing Power Puzzle, Journal of Economic Literature, 34(2), 647-668.

Rubaszek, M., Serwa D. (2009), Analiza kursu walutowego, C.H. Beck, Warszawa.

Schnatz, B. (2007), Is reversion to PPP in euro exchange rates non-linear? International Economics and Economic Policy, 4(3), 281–297, DOI: http://doi.org/10.1007/s10368-007-0091-7

Senbeta, S.,R. (2011), A small open economy New Keynesianvmodel for a foreign ex-change constrained economy, MPRA Paper No. 29996, https://mpra.ub.uni-muenchen.de/29996/1/MPRA_paper_29996.pdf

Sercu, P., Uppal, R., Van Hulle, C. (1995), The Exchange Rate in the Presence of Transac-tion Costs: Implications for Tests of Purchasing Power Parity, The Journal of Fi-nance, vol. 50, 1309-1319, DOI: http://dx.doi.org/10.1111/j.1540-6261.1995.tb04060.x

Sollis, R. (2009), A Simple Unit Root Test against Asymmetric STAR Nonlinearity with an Application to Real Exchange Rates in Nordic Countries, Economic Modelling, vol. 26, 118–125, DOI: http://dx.doi.org/10.1016/j.econmod.2008.06.002

Taylor, M. P. (1988), An empirical examination of long-run purchasing power parity using cointegration techniques., Applied Economics, 20(10), 1369–1381, DOI: http://doi.org/10.1080/00036848800000107.

Teräsvirta, T. (1994), Specification, Estimation and Evaluation of Smooth Transition Autoregressive Models, Journal of the American Statistical Association, (89), 208–218, DOI: http://doi.org/10.1080/01621459.1994.10476462.

Uppal, R. (1993), A General Equilibrium Model of International Portfolio Choice, „Journal of Finance”, vol. 48, 529–553, DOI: http://dx.doi.org/10.1111/j.1540-6261.1993.tb04726.x

Wang, P. (2000), Testing PPP for Asian economies during the recent floating period, Applied Economics Letters, 7, 545–548, DOI: http://dx.doi.org/10.1080/13504850050033355

Wdowiński, P. (2010), Modele kursów walutowych, Wyd. UŁ, Łódz.

Wu, J.L., Chen, P.D. (2008), A Revisit on Dissecting the PPP Puzzle: Evidence from a Nonlinear Approach, „Economic Modelling”, vol. 25, 684–695, DOI: http://dx.doi.org/10.1016/j.econmod.2007.10.011

Dynamic Econometric Models

Downloads

  • PDF

Published

2017-12-29

How to Cite

1.
BURDA, Adrian Marek, MAZUR, Błażej and PIPIEŃ, Mateusz Paweł. Forecasting EUR/PLN Exchange Rate: the Role of Purchasing Power Parity Hypothesis in ESTVEC Models. Dynamic Econometric Models. Online. 29 December 2017. Vol. 17, no. 1, pp. 97-114. [Accessed 6 July 2025]. DOI 10.12775/DEM.2017.006.
  • ISO 690
  • ACM
  • ACS
  • APA
  • ABNT
  • Chicago
  • Harvard
  • IEEE
  • MLA
  • Turabian
  • Vancouver
Download Citation
  • Endnote/Zotero/Mendeley (RIS)
  • BibTeX

Issue

Vol. 17 (2017)

Section

Articles

License

The journal provides an Open Access to its content based on the non-exclusive licence Creative Commons (CC BY-ND 4.0).

To enable the publisher to disseminate the author's work to the fullest extent, the author must agrees to the terms and conditions of the License Agreement with Nicolaus Copernicus University.

Stats

Number of views and downloads: 492
Number of citations: 0

Search

Search

Browse

  • Browse Author Index
  • Issue archive

User

User

Current Issue

  • Atom logo
  • RSS2 logo
  • RSS1 logo

Information

  • For Authors

Newsletter

Subscribe Unsubscribe

Tags

Search using one of provided tags:

PPP, ESTVECM, cointegration, exchange rate forecasting
Up

Akademicka Platforma Czasopism

Najlepsze czasopisma naukowe i akademickie w jednym miejscu

apcz.umk.pl

Partners

  • Akademia Ignatianum w Krakowie
  • Akademickie Towarzystwo Andragogiczne
  • Fundacja Copernicus na rzecz Rozwoju Badań Naukowych
  • Instytut Historii im. Tadeusza Manteuffla Polskiej Akademii Nauk
  • Instytut Kultur Śródziemnomorskich i Orientalnych PAN
  • Instytut Tomistyczny
  • Karmelitański Instytut Duchowości w Krakowie
  • Ministerstwo Kultury i Dziedzictwa Narodowego
  • Państwowa Akademia Nauk Stosowanych w Krośnie
  • Państwowa Akademia Nauk Stosowanych we Włocławku
  • Państwowa Wyższa Szkoła Zawodowa im. Stanisława Pigonia w Krośnie
  • Polska Fundacja Przemysłu Kosmicznego
  • Polskie Towarzystwo Ekonomiczne
  • Polskie Towarzystwo Ludoznawcze
  • Towarzystwo Miłośników Torunia
  • Towarzystwo Naukowe w Toruniu
  • Uniwersytet im. Adama Mickiewicza w Poznaniu
  • Uniwersytet Komisji Edukacji Narodowej w Krakowie
  • Uniwersytet Mikołaja Kopernika
  • Uniwersytet w Białymstoku
  • Uniwersytet Warszawski
  • Wojewódzka Biblioteka Publiczna - Książnica Kopernikańska
  • Wyższe Seminarium Duchowne w Pelplinie / Wydawnictwo Diecezjalne „Bernardinum" w Pelplinie

© 2021- Nicolaus Copernicus University Accessibility statement Shop