## 3 Empirical Results
### Exchange Rates  
Next, we evaluate the ability of the GPR index in forecasting exchange rates. The dependent variable in each model for each country is the exchange rate of the national currency against the U.S. dollar, while the independent variables are the lagged exchange rate and the country specific GPR index of the developing economy under examination. The forecasting accuracies in terms of the MAPE  
Figure 3: Out-of-sample 12-month ahead oil prices forecasts based on the Saudi Arabia GPR index for the SVR and OLS model for the period Jan-2017 to May-2018. Figure 2: Out-of-sample 1-month ahead oil prices forecasts based on the Saudi Arabia geopolitical risk (GPR) index for the Support Vector Regression (SVR) and Ordinary Least Square (OLS) model for the period Jan-2017 to May-2018. are reported in Table 3. As with the oil prices, no model consistently outperforms the RW model, except for Saudi Arabia in all forecasting horizons and Philippines in the three and six-month ahead forecasting window, where both the OLS and the SVR model outperform the RW. In the case of Saudi Arabia, the OLS and the SVR model exhibit similar performance, while in the Philippine peso, the OLS model has lower forecasting error than the SVR one. Nevertheless, the forecasting performance in the case of the Philippine peso is episodical, since it disappears in all other forecasting horizons. Our findings suggest that the GPR index of the emerging countries has a limited predictive power on exchange rates. As we discuss in the introductory section, the effect of a terrorist attack or a conflict on the exchange rates is transitory and probably not obvious on our monthly dataset. As an example, in Figures 4 and 5, we depict the actual and the forecasted exchange rates for Mexico in one-month and 12-months ahead forecasting windows, respectively. \begin{table}
\begin{tabular}{c c c c c c c c c c c c c c c c} \hline \hline
**Forecasting Horizons** & \multicolumn{3}{c}{**1 Month**} & \multicolumn{3}{c}{**3 Months**} & \multicolumn{3}{c}{**6 Months**} & \multicolumn{3}{c}{**12 Months**} & \multicolumn{3}{c}{**24 Months**} \\ \hline Country & OLS & SVR & RW & OLS & SVR & RW & OLS & SVR & RW & OLS & SVR & RW & OLS & SVR & RW \\ \hline Turkey & 2.97 & 2.90 & 2.82 & 6.67 & 6.30 & 5.92 & 11.05 & 10.56 & 8.97 & 19.04 & 18.61 & 13.73 & 40.65 & 32.29 & 18.72 \\ Mexico & 1.82 & 1.84 & 1.83 & 3.78 & 3.88 & 3.84 & 5.59 & 5.68 & 5.33 & 8.74 & 9.41 & _7.97_ & 13.06 & 14.68 & 11.41 \\ Korea & 1.96 & 1.93 & 1.80 & 4.98 & 4.22 & 3.72 & 8.25 & 6.44 & 5.78 & 13.87 & 10.72 & 9.17 & 15.04 & 12.75 & 13.77 \\ Russia & 3.23 & 3.25 & 3.15 & 7.29 & 7.09 & 6.61 & 9.19 & 9.83 & 8.96 & 17.12 & 16.86 & 13.04 & 25.84 & 23.08 & 19.85 \\ India & 1.16 & 1.14 & 1.08 & 2.53 & 2.51 & 2.35 & 4.05 & 4.17 & 3.64 & 6.92 & 7.42 & 6.19 & 9.71 & 10.64 & 9.35 \\ Brazil & 2.99 & 3.11 & 2.69 & 6.87 & 6.54 & 5.66 & 12.26 & 11.09 & 9.22 & 19.61 & 17.86 & 14.33 & 32.38 & 31.82 & 19.57 \\ China & 0.38 & 0.36 & 0.34 & 0.94 & 0.93 & 0.88 & 1.76 & 1.74 & 1.56 & 3.65 & 4.08 & 2.78 & 10.61 & 11.72 & 5.07 \\ Indonesia & 3.68 & 3.39 & 3.21 & 7.60 & 6.73 & 6.13 & 14.53 & 9.63 & 8.53 & 30.34 & 14.93 & 12.70 & 61.78 & 22.22 & 18.19 \\ Saudi Arabia & 0.05 & 0.05 & 0.06 & 0.05 & 0.05 & 0.06 & 0.05 & 0.07 & 0.05 & 0.05 & 0.07 & 0.05 & 0.05 & 0.07 \\ Argentina & 1.85 & 1.68 & 1.82 & 5.12 & 4.28 & 4.63 & 9.76 & 7.25 & 7.85 & 17.16 & 16.32 & 14.26 & 22.20 & 24.52 & 27.12 \\ Thailand & 1.02 & 1.01 & 1.01 & 2.22 & 2.10 & 2.12 & 3.79 & 3.85 & 3.39 & 5.94 & 6.32 & 5.23 & 7.62 & 7.84 & 8.66 \\ Israel & 1.78 & 1.81 & 1.72 & 3.39 & 3.47 & 3.15 & 5.23 & 5.38 & 4.73 & 7.15 & 7.39 & 6.72 & 10.75 & 9.91 & 8.06 \\ Malaysia & 1.65 & 1.63 & 1.59 & 3.67 & 3.63 & 3.41 & 6.19 & 6.42 & 4.68 & 10.11 & 10.83 & 7.85 & 19.01 & 19.00 & 13.57 \\ Philippines & 1.18 & 1.15 & 1.12 & 2.68 & 2.78 & 2.42 & 4.57 & 4.69 & 5.94 & 7.53 & 7.89 & 5.87 & 11.40 & 12.09 & 8.21 \\ \hline \hline \end{tabular} Note: All values are percentages.  
\end{table} 
Table 3: Exchange rate out-of-sample forecasting accuracy—MAPE.