Forecasting the Polish Zloty with Non-Linear Models

National Bank of Poland Working Paper No. 81

29 Pages Posted: 8 Apr 2011 Last revised: 8 Jul 2016

See all articles by Michał Rubaszek

Michał Rubaszek

National Bank of Poland; Warsaw School of Economics (SGH)

Pawel Skrzypczynski

National Bank of Poland

Grzegorz Koloch

National Bank of Poland; Warsaw School of Economics

Date Written: March 1, 2011

Abstract

The literature on exchange rate forecasting is vast. Many researchers have tested whether implications of theoretical economic models or the use of advanced econometric techniques can help explain future movements in exchange rates. The results of the empirical studies for major world currencies show that forecasts from a naive random walk tend to be comparable or even better than forecasts from more sophisticated models. In the case of the Polish zloty, the discussion in the literature on exchange rate forecasting is scarce. This article fills this gap by testing whether non-linear time series models are able to generate forecasts for the nominal exchange rate of the Polish zloty that are more accurate than forecasts from a random walk. Our results confirm the main findings from the literature, namely that it is difficult to outperform a naive random walk in exchange rate forecasting contest.

Keywords: Exchange rate forecasting, Polish zloty, Markov-switching models, Artificial neural networks

JEL Classification: C22, C45, C53, F31, G17

Suggested Citation

Rubaszek, Michal and Skrzypczynski, Pawel and Koloch, Grzegorz, Forecasting the Polish Zloty with Non-Linear Models (March 1, 2011). National Bank of Poland Working Paper No. 81. Available at SSRN: https://ssrn.com/abstract=1804011 or http://dx.doi.org/10.2139/ssrn.1804011

Michal Rubaszek (Contact Author)

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

Pawel Skrzypczynski

National Bank of Poland ( email )

00-919 Warsaw
Poland

Grzegorz Koloch

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

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