An Econometric Analysis of Detecting Structural Changes in the Seven Major Exchange Rates with MAIC Method

An Econometric Analysis of Detecting Structural Changes in the Seven Major Exchange Rates with MAIC Method: January, 1974 through September, 1986

This paper tries to identify the particular point of time when the foreign exchange market undergoes a significant structural change which could be a possible reason why most existing models of exchange rate determination fail to explain exchange rate movemets and forecast for out-of-sample periods. The technique developed by the writers is a new application of MAIC. bringing it one more step further. It is also superior to traditional methods because of its arbitrary-free characteristic of detecting structural changes. Seven major currencies vis-a-vis the U. S. dollar are examined for the recent floating period.