In which exchange rate models do forecasters trust?

D. Hauner, J. Lee and H. Takizawa

Applied Economics Letters, 2014, vol. 21, issue 18, 1302-1308

Abstract: Using survey data of market expectations, we describe which popular exchange rate models appear to be consistent with expectation formation of market forecasters. Exchange rate expectations are found to be correlated with inflation differentials and productivity differentials, indicating that the relative PPP and the Balassa-Samuelson effect are common inputs into the expectation formation of market forecasters.

Date: 2014
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DOI: 10.1080/13504851.2013.804158

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