Beyond Burgernomics and MacParity: Exchange Rate Forecasts Based on the Law of One Price

Matthias Lutz

No D4-1, 10th International Conference on Panel Data, Berlin, July 5-6, 2002 from International Conferences on Panel Data

Abstract: Cumby (1996) suggests that (i) deviations from MacParity are stationary, (ii) relative Big Mac prices converge rapidly and (iii) provide significant information on likely future exchange rate movements. This paper examines to what extent these results can be generalised to other micro-level price data such as those provided in the UBS surveys Prices and Earnings round the Globe. In many respects, the MacParity findings do not constitute a special case, although they are sensitive to sample period and numeraire currency. Surprisingly, estimates based on aggregate CPI data for the same sample periods provide qualitatively similar results.

Keywords: Big Mac Index; micro-level price data; law of one price; exchange rate forecasts (search for similar items in EconPapers)
JEL-codes: F30 (search for similar items in EconPapers)
Date: 2002-03
New Economics Papers: this item is included in nep-ifn
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:cpd:pd2002:d4-1

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