[Title Page]
Copyright
Contents
[Abstract] 5
I. Introduction 6
II. Methods of Estimating Latent Common Factors 10
1. Principal Component Factors 10
2. Partial Least Squares Factors 12
3. Least Absolute Shrinkage and Selection Operator Factors 14
III. In-Sample Analysis 15
1. Data Descriptions 15
2. Some Preliminary Analysis 16
2.1. Unit Root Tests 16
2.2. Persistence of the Real Exchange Rate 19
3. Factor Model In-Sample Analysis 20
IV. Out-of-Sample Prediction Performance 26
1. Factor-Augmented Forecasting Models 26
2. Prediction Accuracy Evaluations for the Real Exchange Rate 29
3. Prediction Accuracy Evaluations for Exchange Rate Returns 33
4. Model Predictability with Proposition Based Global Factors 36
4.1. Purchasing Power Parity: Relative Price Factors 36
4.2. Uncovered Interest Parity: Interest Rate Spread 38
4.3. Real Interest Rate Parity: Real Interest Rate Spread 39
V. Concluding Remarks 41
References 42
Abstract in Korean 46
BOK 경제연구 발간목록 47
[Back Cover] 56