C - Mathematical and Quantitative Methods
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Regime-Switching Models: A Guide to the Bank of Canada Gauss Procedures
This paper is a user's guide to a set of Gauss procedures developed at the Bank of Canada for estimating regime-switching models. -
Switching Between Chartists and Fundamentalists: A Markov Regime-Switching Approach
Since the early 1980s, models based on economic fundamentals have been poor at explaining the movements in the exchange rate (Messe 1990). In response to this problem, Frankel and Froot (1988) developed a model that uses two approaches to forecast the exchange rate: the fundamentalist approach, which bases the forecast on economic fundamentals, and the chartist approach, which bases the forecast on the past behaviour of the exchange rate.