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In Which Exchange Rate Models Do Forecasters Trust?

Jaewoo Lee, H. Takizawa and David Hauner

No 2011/116, IMF Working Papers from International Monetary Fund

Abstract: Using survey data of market expectations, we ask 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 Balassa-Samuelson effect are common inputs into expectation formation of market forecasters.

Keywords: WP; interest rate; nominal exchange rate; GDP; Exchange rate models; forecasting; interest rate differential; exchange rate expectation; depreciating exchange rate; exchange rate movement; exchange rate appreciation; expected exchange rate change; exchange rate regime classification; euro exchange rate; Exchange rates; Exchange rate arrangements; Purchasing power parity; Currencies; Exchange rate forecasting (search for similar items in EconPapers)
Pages: 17
Date: 2011-05-01
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Citations: View citations in EconPapers (1)

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Handle: RePEc:imf:imfwpa:2011/116