The Exchange Rate Forecasting Puzzle
Francis Vitek ()
International Finance from University Library of Munich, Germany
We survey and update the empirical literature concerning the predictability of nominal exchange rates using structural macroeconomic models over the recent floating exchange rate period. In particular, we consider both flexible and sticky price versions of the monetary model of nominal exchange rate determination. In agreement with the existing empirical literature, we find that nominal exchange rate movements are difficult to forecast, with a random walk generally dominating the monetary model in terms of predictive accuracy conditional on observed monetary fundamentals at all horizons.
Keywords: Exchange rate forecasting; Monetary model (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-for and nep-ifn
Note: Type of Document - pdf; pages: 17
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpif:0509005
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